Getting your spending, saving, and income to line up perfectly is more than just crunching numbers.

At first, budgeting might seem like you’re being forced to make tough choices that go against what you want, but it beats the alternative – which is not having control over your finances. Living on a budget might feel restrictive, but not having one leaves you vulnerable to unexpected expenses that could potentially leave you in a less than desirable situation.

Many of us struggle with budgeting because it can be tedious and challenging to stick with. However, there are budgeting methods for every lifestyle, regardless of where you are on your financial journey. Consider the three budgeting methods below, but remember that the key to success lies in being realistic, setting small and achievable goals, and allowing yourself a degree of flexibility.

Zero-Based Budgeting

Zero-based budgeting is accounting for every dollar of your monthly income and giving it a specific purpose. Think of it as a game where you aim to hit zero by aligning your earnings with your expenses. Every dollar gets a job, and together they create a perfect balance.

Start by figuring out your monthly take-home income, including your salary, benefits, and any other sources of income. Next, make a list of all your monthly expenses – and don’t forget to include the fun stuff like entertainment and leisure activities. Then, subtract your expenses, savings contributions, and debt repayments from your income. The goal: a grand total of zero. When you hit that magic number, you’ve successfully created a zero-based budget.

It’s important to understand that this method doesn’t mean that the goal is to spend everything you earn. Instead, it’s about being deliberate and purposeful with your money. The ideal scenario is to allocate a portion of your monthly income toward specific savings goals, such as building up emergency savings or saving for retirement. The key is to have a plan for every dollar you earn.

Reverse Budgeting

Traditional budgeting involves tallying up all your expenses and then putting whatever is left into savings. Reverse budgeting, also known as the pay yourself first approach, flips the script by prioritizing savings right from the start. Instead of waiting until the end of the month to save whatever is left, you proactively move a portion of your income directly into your savings account as soon as you get paid.

Automated transfers can simplify this budgeting method. By setting up regular transfers between your checking and savings accounts, you can contribute to your savings goals without lifting a finger. For instance, if you receive your paycheck on the first of each month, you can schedule an automated transfer for the second of every month. This way, your savings grow without any extra effort on your part. REV’s digital banking platform offers Savings Goals, which can be especially useful. You can set up recurring transfers into specific savings goals, removing the need to manually calculate how much you should move every month.

Once you have established your savings goals and automated the transfer process, you can allocate the remaining amount to cover essential expenses like bills, groceries, and other necessities. The beauty of reverse budgeting is that anything that’s left after meeting these obligations becomes your discretionary cash. This money can be spent guilt-free, whether you’re treating yourself to your favorite coffee or planning a vacation.

The 50/30/20 Rule

The 50/30/20 budgeting rule is becoming increasingly popular due to its simplicity and practicality. This method provides a straightforward framework for distributing your income, allocating 50% to needs, 30% to wants, and 20% to savings.

It’s important to begin with your needs, which include necessities like utility bills, rent/mortgage payments, healthcare, and groceries. Take a moment to assess each expense and consider whether you can live without it. If the answer is no, then you’ve pinpointed a need. It’s recommended that roughly half (or 50%) of your budget should be set aside to cover these non-negotiable expenses.

The remaining 30% of the budget is reserved for wants, which allows for a degree of flexibility and enjoyment. These expenses may not be necessary for maintaining your livelihood, but they enhance your life. You may choose to spend that money on streaming subscriptions, hobbies, dining out, or traveling.

Lastly, the remaining 20% of your budget should be directed toward savings. This includes both short-term and long-term financial goals, such as opening an individual retirement account (IRA) to plan for the future or investing in a high-yield savings account for unexpected expenses.

Sticking With Your Budget

Zero-based budgeting is accounting for every dollar of your monthly income and giving it a specific purpose. Think of it as a game where you aim to hit zero by aligning your earnings with your expenses. Every dollar gets a job, and together they create a perfect balance.

Start by figuring out your monthly take-home income, including your salary, benefits, and any other sources of income. Next, make a list of all your monthly expenses – and don’t forget to include the fun stuff like entertainment and leisure activities. Then, subtract your expenses, savings contributions, and debt repayments from your income. The goal: a grand total of zero. When you hit that magic number, you’ve successfully created a zero-based budget.

It’s important to understand that this method doesn’t mean that the goal is to spend everything you earn. Instead, it’s about being deliberate and purposeful with your money. The ideal scenario is to allocate a portion of your monthly income toward specific savings goals, such as building up emergency savings or saving for retirement. The key is to have a plan for every dollar you earn.