382 | 7 Budgeting Methods Explained: What Works & What Doesn’t (Zero-Based, Cash Envelopes, Cash Stuffing, 50/30/20, Paycheck Budgeting, FIRE, & More)
Not all budgeting methods are created equal—some will keep you stuck in financial stress while others can help you actually build wealth. We’re breaking down the good, the bad, and the outdated so you can budget in a way that actually works for your life.
Budgeting: Love It or Hate It, You Need a Plan
Managing money is personal, and there are about a million ways people try to do it. But not every budgeting method is as helpful as it seems. In this episode, we’re breaking down seven popular budgeting strategies—paycheck planning, zero-based budgeting, the 50/30/20 rule, cash stuffing, the FIRE method, expense tracking, and the no-budget method.
We’ll share our (sometimes strong) opinions, explain why some of these methods might keep you stuck, and introduce you to a system that actually works—without making you feel broke or overwhelmed.
So, let’s dive in!
7 Budgeting Methods (And Why Some Don’t Work)
1. Paycheck Planning
The idea: Every paycheck gets assigned specific bills or expenses.
Why people do it: It feels like a logical way to make sure everything gets paid on time.
Why we don’t love it: This method keeps you stuck in the paycheck-to-paycheck cycle because you’re constantly reacting instead of planning ahead. Instead, we recommend a system where you look at your money from a monthly perspective and get a paycheck ahead—it’s a game changer.
2. Zero-Based Budgeting
The idea: Every dollar is assigned a job, so at the end of the month, your income minus expenses equals zero.
Why people do it: It gives a clear plan for where money is going.
Why we don’t love it (at least, the way most people do it): It often gets misinterpreted as a “broke” budget where there’s zero wiggle room for fun. We believe in hitting zero—but the bougie way, meaning your budget includes space for things you enjoy while still being intentional with every dollar.
3. The 50/30/20 Rule
The idea: Spend 50% on needs, 30% on wants, and 20% on savings and debt.
Why people do it: It seems simple and easy to remember.
Why we don’t love it: In real life, it’s not that practical. How do you categorize groceries that include both essentials and treats? Plus, why limit yourself to saving only 20% if you could do more? And what if you’re not there yet? You don’t want to feel like you’re already failing! Budgeting isn’t one-size-fits-all.
4. The Cash Envelope System (Cash Stuffing)
The idea: Withdraw cash for different spending categories, and when the cash is gone, you’re done spending.
Why people do it: It creates accountability and prevents overspending.
Why we don’t love it: It’s outdated in our digital world. No one has time to run to the ATM every week or carry around envelopes of cash. Instead, we use a digital envelope system—separate bank accounts that act as spending categories while still keeping everything modern and convenient.
5. The FIRE Method (Financial Independence, Retire Early)
The idea: Save and invest aggressively (often 50%+ of income) to retire as soon as possible.
Why people do it: It’s about achieving financial freedom ASAP.
Why we don’t love it: We love the idea of financial independence, but extreme sacrifice isn’t necessary. Your kids are only young once, and you deserve to enjoy life while saving for the future. Balance is key!
6. Expense Tracking
The idea: Log every dollar you spend and analyze it at the end of the month.
Why people do it: It provides insight into spending habits.
Why we don’t love it: Tracking is not budgeting. It’s accounting. Watching money disappear doesn’t help you plan for what’s ahead. Our system eliminates the need for tracking because your budget is already pre-planned and separated into accounts. No more guesswork!
7. The No-Budget Method (AKA Hope & Pray Method)
The idea: Spend as you go and just hope there’s enough money to cover everything.
Why people do it: It’s easy and doesn’t require effort.
Why we don’t love it: This is the least effective way to manage money. It leads to constant stress, uncertainty, and financial insecurity. If this is your current approach, we’re here to help you make a change!
So, What’s the Best Way to Budget?
Our system is designed to be simple, automatic, and stress-free. Here’s how it works:
✔ Look at your income on a monthly basis (not paycheck-by-paycheck).
✔ Separate money into different accounts for bills, spending, and savings.
✔ Make sure everything happens automatically—so you don’t have to track or micromanage.
✔ Give every dollar a job while still allowing room for fun and flexibility.
It’s practical, modern, and actually works in real life—without making you feel like you’re constantly sacrificing.
Let’s Keep the Conversation Going
Have you tried any of these budgeting methods? Which ones worked (or didn’t work) for you? Join us in our Facebook group and let’s talk about it!
And if you know someone who swears by one of these budgeting methods, send them this post—it might just start a conversation that changes their financial future.
Until next time, happy budgeting!
Book Your Free Call Now!
We are excited to create the time & space to talk to you about your current money situation. This is a free, no-obligation call where we can answer questions you may have and maybe find some quick wins for your budget.
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Full Transcript
Vanessa. It turns out there are so many different ways people try to budget and manage their money. Yeah, there are. . In this episode we are breaking down seven popular budgeting methods and listen, we have some strong opinions and that’s okay. ’cause you’re gonna, you’re gonna love them all. Yeah.
We’re gonna talk about, you may have heard of like the 30, 50, 30, 20 0 based budgeting, paycheck planning, cash stuffing, all of these different things. We’re gonna talk about ’em today. So let’s get into it. Mm-hmm.
So the first one we’re gonna look at is paycheck planning. And this is different than what we talk about when we talk about your paycheck plan.
This is where people actually assign each paycheck to pay for like specific bills. Mm-hmm. Yeah. So every paycheck looks different. Mm-hmm. And it’s all specifically allotted to each to your different bills and and different things that you need to do. Yeah. So instead of like looking at your month as a whole, like we talk about.
We want you to look at your month as a whole and see all the money that’s coming in, and what can you do with all of that money? They actually take specific paychecks and we’ll say they will say you, because we know, we hear that coming in from our listeners is that you feel so broke in the moment and so tight with your money that you are actually saying, okay, this paycheck, this is the only thing I can do with it.
This next paycheck, Hey, I can actually buy groceries that I can maybe buy a coffee. Yeah. And the good thing is like at least you’re doing something so you’re trying. Yeah, but this. You know, we’ve said it before, it keeps you in this cycle of paycheck to paycheck, which is not fun. Nobody likes that. And you know, you’re not able to do anything long term because every dollar you’re, you know, you’re allotting it to the right now.
So obviously our take is we want you to do our system. We want you to instead, we want you to look at the bird’s eye view. Look at the month as a whole. What can your money do as a month as a whole, and then get a paycheck ahead. That’s part of our system too. And it’s gonna be a game changer. Yeah. And when Shana says a paycheck ahead, it’s like if you have the first paycheck of the month of March and it’s coming in on March 6th or seventh or something, like, it’s too late.
So we want you to make sure that you’re looking ahead and planning all the, all that you can do with your money, with just that first paycheck that’s coming in before the month starts. All right. So the next one is zero based budgeting. And you’ve heard, probably heard that say it said a lot. This is where every dollar is assigned a job, right? So you have, you know, your income minus everything, and then you get down to zero on purpose.
There’s no money floating around. Or maybe I, maybe I have this, maybe I don’t, you’re like, you’re literally. Planning and budgeting every single dollar. Mm-hmm. Which we’re not necessarily against. What we are against is, I think the way that it’s been portrayed is like this super broke mentality of like, there’s zero money left over to do anything.
You can’t go on a date. You can’t, you can’t have hobbies, you can’t do, it’s literally that beans and rice mentality. And so we, we just, that’s not what we’re about. We want you to know that you don’t. You can do this in a bougie way and not necessarily that broke feeling way. Yeah. We wanted you to get to zero the bougie way, not the broke way.
And the other thing I think that’s important, Vanessa, is our system does it automatically. So it’s one thing to put it on paper and say every dollar has a job, but the way that we’re gonna teach you to do it, every dollar is going to go to do its job without you having to do anything in the moment.
Right. And I think that’s different. Like yes, every dollar’s a job, but we’re actually like it’s going to do the job, which is exciting. Right. Yeah, because like, like Shena said, our system does it automatically for you. It shows you exactly. And then by the time you’re done allocating everything. The boujee way, it is at zero, but you don’t feel like you, you can’t live that month.
Right? Yeah. All right, so the third method, you may have heard the 50, 30, 20 where 50% of your budget goes to quote unquote needs. 30% goes to quote unquote once and 20% goes to savings and debt. Mm-hmm. Debt. Yeah. So we have some things to say about this one. Okay. So when you think about 50% needs, you’re thinking about like utility bills and groceries and gas and things that you absolutely need, and then you have to break down, okay, well what if.
What if, what part of my spending and what part of my bills is actually wants, and then what rest of it is 20% for debt and saving it. It’s so convoluted. It’s not very clear. Yeah, and I mean it’s theoretically, it’s simple and easy to remember this formula. But what you actually do with your hands does not translate from this formula.
Mm-hmm. Like Vanessa said, you can, like, you can have some bills that are needs and you can have some bills that are once, so then how are you supposed to set up your budget? You know, you have a need column, you have some, you have some groceries, and like, it’s just gross. It’s not cute. We don’t love it. But the other, and he home really quick.
It’s like, okay, well part of your groceries is needs and wants, right? So it’s like you really, you can soup, you can get really convoluted here. So, yeah. Yeah. And so, you know, this is this is an, a decent thing to do, possibly if you have a lot of money and and you just can out, set up percentages and never really have to think about budgeting.
However, that’s not most of us. And we, we specifically know that if your expenses are already tight, this might not be possible. It’s, it’s an arbitrary way of doing things. Yeah. Well, and you know, if you, if you can save 20%, if you can save 25 or 30%, like we want you to be able to do that. We don’t want you to settle on.
Oh, well it only says 20%. No. Can’t save any more than that. Can’t save 21%. Like, yeah. Terrible. Right. So we just, and again, we feel like this is very cookie cutter. This is very like. One size fits all, and that is not what we see over our years of budgeting and helping thousands of people. Every single person’s lifestyle is very different as it should be.
Yeah. And we don’t, we’re not, you’re, you are not. You’re not a cookie, so we’re not gonna cut you. Okay. But back to the idea of the 25% or 20, we have clients that are living on half of their annual income. Really? Yeah. So they are savings, their everyday spending, their bills, their debts. And their savings buckets are funded halfway through the year, basically, and the other half, they’re just putting all of that into investments and for the future, right?
So what are they supposed to say? Well, it doesn’t say 50%. Doesn’t say, 40% says 20. So I’ll go ahead and find a way to spend or blow all my money. Blow my money. No, no, it’s ar That’s what we mean by being arbitrary. And also what, unfortunately, what we’ve seen is. People come in and they’re not able to save Right.
A full 20% in the very beginning. Right. So if you, if you, if you see that number, like, oh, I’m supposed to save 20% and you can’t Yeah. And you are automatically gonna feel like you’re failing. Yeah. And you can’t do this. This isn’t for me. Obviously I shouldn’t budget. Like there’s all these thoughts and questions and feelings that are gonna go through your mind because you already think that you, you can’t do this.
Yeah. And I don’t, that’s not fair. Yeah. And the thing is, it’s not that you couldn’t get there, but you might have to start like, when, when, when we teach you how, how we do it. It might be okay, I’m starting with, I have, I have five per, and it happens to be 5%. So it’s actually $233, right? Because it’s a very specific amount because you have very specific numbers in your budget, right?
Mm-hmm. But you might have that much, and it might get go, you might get more as you go, as you get better budgeting or pay off debt or change your bills or whatever. But it there, it’s just based, it’s supposed to be based on what your life is actually, what’s actually happening in your life. Not some arbitrary number.
Well, and I had a client who, you know, when she first started coaching, it was like, I wanna do the savings buckets now. And I was like you can’t, we are doing triage. We have to clean up and fix what’s going on right now, and then eventually we’ll get there. If we had this system in place, like it just wouldn’t work.
Yeah. Okay, so the fourth method that we know is kind of popular is the cash envelope system. Mm-hmm. And I actually did this for a while. We, we did, we had cash envelopes in our, in our safe. And it worked for a while, but this is where you take out cash for certain categories. And that’s what you’re allowed to spend.
When it’s gone, it’s gone. Yeah. And basically there’s like no swiping, there’s no digital spending, no online spending. Everything is just cash. And yes, there is this whole idea that holds you super accountable. Mm-hmm. So you won’t be over spending. Yeah. We get that. But we just feel like it’s, it’s a little it’s a little out, out of our era right now with this digital world that we’re in.
Yeah. Yeah. We’re in a digital world, but also it, we do think sometimes maybe it’s a great place to start. Mm-hmm. But. It, it’s just not practical. That’s what we’ve learned. Like we, we, we, like we said, we used to do it and then we saw you guys, you were like, Nope, not gonna do that. Not willing to do that.
Don’t want that. Don’t wanna go with, do that. So we, we sort of like merge or not merged. Morphed, yeah. Merged. We morphed. We morphed. Okay. We morphed into digital envelope systems. So it’s a similar concept, but it’s digital because you guys, you know, you don’t necessarily wanna go to the ATM every time or go to the bank or get envelopes and make sure you take the classroom.
That was another one, even though we were like just remember, take the classroom envelope, you can, you’re gonna make it, but. And if, and by the way, if you forget it, you have to turn around and go home and go grab it. And then you love that. So we changed it to the digital envelope system. Yeah. And, and, and it still accomplishes the same thing, but it does being more digital and, and honestly it just takes less time.
Yeah. So like if you have one debit card Yeah. And you have an account with the exact amount of money that you can spend for that category, it’s so much easier to take to account for that one debit card versus like Shana said, did I leave the envelope at home? Where is it at? How much is in it? And all this stuff.
And it just takes so much time. We literally heard a lady. Talk about cash stuffing, and she’s like, oh, I go and pay my bills in person to all of my places. Or I send them a check and it’s like, I think that that is fine if that’s the, the time of your life that you’re in. I, I don’t, I can’t do that. Can you just understand I barely have time to get gas, right?
I can like, I don’t even understand like, and I want you to know, I went to the gas station, I felt really proud and then it was out of gas and I was like, well, you tried. This was my only time to get gas today. I dunno how, what’s gonna happen. We’re gonna walk home. But really the digital envelope is our take on the cash envelope system.
Again, still separating, still being very intentional. Making it easier to use it like m said in this digital age. And guess it’s just like the level up. Mm-hmm. It’s just a level up. It’s the next level. It’s like the glow up, if you will, for the cash. And I love my, I think I have four different debit cards and they’re all designed differently.
It’s very easy to understand what, which one goes to, what account, and I just love it. I love it too.
Okay, well let’s talk about the fire method. ’cause that’s definitely a big big one and got a lot of popularity. Yeah. Okay. So the fire method is when you aggressively save and invest your money, like usually around 50% of your income to reach some type of financial independence.
Independence. Like asap. Yeah. Like yesterday. Yeah. Right. So that’s what they’re trying to do. They’re trying to retire as early as and as fast as they can. Yeah. So the goal, you know, like I said, is to build wealth. So you get to that and be able to live off your investments mm-hmm. And retire, quote unquote, so that’s fine. We love, we love the intentionality. We love the dreaming. Mm-hmm. Like the, the vision. Vision. The vision casting. You have vision. Yeah. But what we have noticed is it’s, it’s like different, you know, I, I think Dave and the fire people are kind of a little bit like this. They have some things in common, but then they also kind of butt heads a little bit.
Yeah. Butt heads. But they’re not that different in that they want you to sacrifice everything right now. For something in the future, which is, you know, sort of admirable. But also what we know is you are not guaranteed to live forever or a certain age. Right? You know, you’re not guaranteed tomorrow and your kids, this is what we know.
Your kids are only with you. So we, you know, we did, we did grow up, right? We grew up on the Dave Ramsey method, right? Yes, Vanessa, we did and we were beans and racing It. Personally in my twenties. Yeah. And then now we’re like, Hey, we’re running outta Springs break. Spring breaks. Literally, I think I would like to go on a spring on a big trip.
And I don’t, we have two more after this year. Two more. That’s it. Anyway. And so that’s when we, when when our kids, we were like, we became aware. We were like, oh no, we don’t wanna tell people one to sa to sacrifice healthy food because they can’t afford it as much. Or sacrifice going on vacations while your kids are still at home like.
We, and so the fire people have the same mentality, like sacrifice everything, don’t do anything. Spend as little as possible until you get to this big number, right? So that you can have this wonderful life later. And we’re just, we’re not sure about that. Well, it’s just like Shana said, you have a short amount of time guaranteed with your kids at home, and we as well, we don’t wanna speak for you.
Maybe you do wanna sacrifice everything we do. Not as humans. Nope. I mean, we know that we’re gonna tr to travel volleyball `instead. And I, and we know that our, a lot of our clients don’t. You don’t get those years back. Mm-hmm. And I think when people ask me for parenting advice, the one thing I tell them that I continually.
Say over and over again is, be present. Be present in the moment because you don’t get this time back. And I think doing that, even if it’s this, listen, I’ve done staycations before, and they’ve cost just as much as going on vacation. Mm-hmm. Because it does cost money to do something. So you still want to be active, you still wanna enjoy things.
And there are things that you, in places that you can take your kids now that you won’t be able to do when they grow up. Yeah. So take advantage of it. Well, it’s not just your kids like, and I, I it’s not just your kids, it’s you. So my husband says a lot. This is the youngest we’re ever gonna be. Yeah.
Again. And so like the kind of date nights we might wanna do, or, you know, you getting, you spending money to go to a gym to get healthy because this is the easiest time of your life you’re gonna have doing it. Right? So that’s what we’re saying. We still do want you to, one, get outta debt. Two be.
Intentional with your spending. Three, we want you to be saving and getting ready for retirement and having that vision and having that goal too. We just want it to be a little bit more balanced of an approach. Right. And so maybe we should stop ranting on this one. Well, it’s just, you know, when people come to us and they say, I wanna get outta debt, but I, Hey, I also wanna go on a couple of vacations, we’re like, yes, you can do that, do that.
And they’re really, yes. Like we are not about that being in a rice lifestyle lifestyle, and we have shown people’s like, oh, you can’t do both. We, yes, it’s proven. Sorry. Yeah. We’ve done it. We’ve shown our clients how to do it and they love it. Well, and I’ll say the last, the last thing is. Really what you want is financial independence, not retire early.
That’s the other thing I don’t particularly love about that particular phrase or whatever. You don’t need to retire at 40. You need to have something to do with your life. The goal really that you want is to have the option to say, this is what I’m actually going to do. I don’t have to do that thing. I’m going to do this instead, or whatever.
And so we, we want you to have financial independence and we do. We want all of that, but we just want it. It’s not, you might need to work that job for five years more, but you were able to do a little bit more and you were able to get more set up and you were able to enjoy your life on the, the, the journey, right?
And so that’s just our take on that one. Well, and money allows you to do a lot of things, and we get that. And we don’t want you to be controlled by money or motivated by money. We want you to be motivated by your calling and what you wanna do with your life and your, your kids, your families, your goals and all that.
Yeah. Yes. You need money to get there. So yes, we want you, like Shayna said, to be able to be financially independent. But how you go about getting there doesn’t have to be so dramatic, crazy. Come on, we can just be normal. Okay. Tracking expenses, listen, no, that’s all I have to say. Not a budget. No, that is not a budget.
Okay. No. But a lot of times we know people are, are accounting. Right? They’re saying, this is where all my money went. That’s not budgeting, but it is something that you spend a lot of. We know that you guys spend a lot of time on. We don’t want you to do that at all. That’s not what we’re here. Watching it go away doesn’t make you feel better.
Right. And saying, this is where all my money went this month. Yeah. And I’m gonna do this all over again next month. That’s not helping. Yeah. It doesn’t allow you to stop stressing. Okay. And a lot of these apps that you see, we’re not gonna name drop any of ’em. We’re just gonna say there’s a lot out there that literally Yes.
They’re like, oh, but they’re so great because they attach to my bank account and then they look at all my stuff. No, that is tracking, that’s bookkeeping. That’s accounting. You are looking at what happened. That is past tense. Yeah. Not what’s going to happen in the future. Yeah. And that is why our budget system works so well because you separate your money into the accounts and it is saying here is the money that you can spend future tense, this is your budget.
Future tense. Okay. So that is the difference. We don’t want you to track, we don’t recommend tracking. It’s not fun. Who has time for it? And it’s boring. Yeah. Okay. So lemme just clarify that a little bit more, Vanessa. So. When you have these opposite track, you might set an amount, let’s say $300 for spending a month, and then it goes into your bank account and it, it tries to designate, which it doesn’t get right, by the way.
Right. Which things you spent money on and tell you if that’s where you, where you landed. If you like, how well you did, if you did more or less than 300. Right. Our budget system says, here’s $300 in one account called spending literally. And that’s all you get. Have fun. And all you have to do is look at that account and not, and when it, when, when your debit card don’t work anymore, that’s because you hit your limit.
You’re done. You can, you don’t have to track anything. If you want to look back and see where you spent your money, you can in one bank account. ’cause all the transactions, the only thing happening in there is what you spent money on. Mm-hmm. And therefore, it’s tracked. You done did it, but you don’t even have to do that.
Well and it’s gonna hold you super accountable. ’cause like Shayna said, when you get down to 20 bucks left, you’re not gonna be going to the store and spending $22. All you have to spend is 20 bucks. Yeah. So it really does. It is kind of like using cash, you know, like actual cash. Tangible cash. It is a really great accountability partner to have that extra account.
Yeah. All right. Last one is the no budget, which a lot of you are on. We love you. It’s called the Hope and Pray method. Yeah. The AKA Hope and Pray Method. And this is like. You know, where you’re kind of just spending as your bank, your bank account balance goes down and you’re just hoping that it works out by the end of the month or by the next paycheck, right?
You just got your, you got your fingers crossed at the checkout line, hoping that doesn’t your card swipe? Yeah. And if it doesn’t, you have a credit card like backup to swipe. That’s not, we’re not, we don’t love that. I, I know you’re surprised that we, that’s, we’re not for that one. But this is what people, this is why you don’t know where your money’s going.
This is why you’re stressed. Right. So that’s not a method. It is a method, but it’s not a great one. You know, it is a way of doing things, but we’re not endorsing it. Yeah, absolutely. And we just see that it’s not really working with our clients when they come to us. So we just don’t recommend it. We’re just gonna scratch that one off the list for sure.
Yeah. So, you know, obviously. We said all that to tell you our system is clearly the right way. Okay. We’re really humble about it. Okay. And if you couldn’t see me, I was like, Hey, I was gonna say I think we are humble. I know, but people tell us it is literally game changing. You missed it. I was gonna describe how I flipped my hair and I licked my, put my finger in my tongue, in my corner of my mouth that nobody wants to know.
Now I don’t know why I said that out loud, but I did. You’re welcome. You guys anyway. Yes. We love our system. You can listen to all these podcasts. The basics are income, minus your debt, minus your bills, minus your spending, minus your savings. All automatic, separate accounts. That’s the basics of it. And everything happens the same, every payday, right?
And you’re happy. Well, and it’s really, it’s automatic. There’s no tracking required. The only thing we’ll say that you go in there is. Check the boxes at, at the end of the month if you want to make sure all your bills came out. That’s literally it. But as far as your, your spending, there’s no tracking.
And that is, I think the biggest part. ’cause you, where do you live in your budget? You live in the spending section and it is so easy to know I have a certain amount of money, I can have fun with it and do what I want with it. And I don’t have to track where it all went, because it’s already telling me that in the separate account.
So what we want you to do is we want you to share this episode with someone who’s telling you that you need to do this method or that method, or maybe your spouse or your friend, that you guys do the same method together and you have the same app or you have the same whatever, and like, and then just spark a conversation and talk about it.
And. You know, come talk to us about it. ’cause we wanna talk to you about it. We will. We won’t die on these hills, but we’ll be happy to talk Yeah. Talk to you about it. We’ll have a productive conversation. Yeah. And ’cause we won’t have a little bit of say, have you noticed that? It’ll be fine. Okay. Okay.
Let us know in the Facebook group. Come in there let us know what you think or what methods you’ve tried and they haven’t worked for you.
