budgeting types
Money Management

There are 3 Main Budgeting Types. Which One Are You?

Question: Of all the budgeting types, do you know which one works best for you?

Kinda? Loosely? Or are you more like, wait, there are many budgeting types??

Well now’s a good time as any to find out the specifics of how to budget your money. In this article, you can find out the different budgeting types, what’s good about each of them and incorporate it in your financial life.

I argue it’s important to know your own budgeting types (you may have more than one). Using the one that works better for your personality will make budgeting habit easier, thus helping you achieve specific goals (ie paying off debt) sooner.

#1 – Use the Cash Envelope System if… You’re paying off debt / Weaning bad credit card swiping habit

What is it: A cash-only budgeting type

How it works: You stuff literal cash in literal envelopes, each earmarked for different expense categories, and only spend from there. If the money is gone, the spending stops.

In Malaysia, Siti Sabidi is well-known for promoting this method. She also sells cash envelope wallet sets and offers group coaching sessions, so go check that out!

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You can find a lot of resources for the Cash Envelope method. I suggest going on a Youtube binge – you can see how individuals and families use and tweak this budgeting type to suit their life.

Not really into this budgeting type? Well, perhaps…

#2 – Use expense-tracking if… You like making notes and knowing where your money went – expense-tracking (manual or app)

What is it: Record and track every cent, categorising them under its relevant expense categories.

How it works: You review the data and make spending adjustments in the following months. I like it because there’s an element of shock factor that tends to work for behavioural change. For example, if Eating Out category exceeded [amount you’re comfortable with] last month, then you may make time for meal planning and prepping next month.

This is my preferred budgeting type, but I know its (1) hard to pick an app that suits you (there are SO MANY to choose from), and (2) the habit can be hard to stick to.

Read tips that worked for me in How Expense Tracking Looks Like (As Someone Who Doesn’t Budget) article.

One step above: If you enjoy micromanaging and want to know EXACTLY which money went where and making sure your data and bank account tallies, you can read up the principles behind Zero-based Budgeting. The tagline is ‘give every dollar a job’. It’s a bit too intense for me but whatever works.

Budget Update August 2020

#2.1 – Use Excel budget spreadsheet if… You are #2 AND a spreadsheet geek –

This is a subset of team expense-tracking. No apps or platforms are good enough for you, or have enough personalisation, so you do it yourself via Excel spreadsheet. You complain about it but secretly love doing the formatting merge cells all (you may ‘cheat’ by downloading a budget spreadsheet then customising it yourself).

Tip: Bet you didn’t know Google has a free Monthly budget template. Go to Google Sheets and find it in the Template Gallery.

budgeting style

#3 – Use the 50/30/20 Rule if… You’re lazy to track expenses –

What it is: 50% for needs, 30% for wants, and 20% for savings.

budgeting types

The ratio is completely adjustable; for example, you might want a higher savings rate, so you might do 50% savings, 25% needs and 25% wants. I know some personal finance Instagrammers especially like to show their high savings rate!

How it works: Order of priority: Savings-Needs-Wants, regardless of ratio. You ‘pay yourself first’ by transferring xx% of your salary to your savings/ retirements/ emergency/ investment accounts.

AFTER you paid yourself first, then you calculate and pay for life’s necessities (Food+ Transportation+ Accommodation+ Miscellaneous Needs liddat), and then only spend the rest on whatever you want.

Which budgeting types do you use?

Do you fit squarely into one of the budgeting types explained above, or do you use a little bit of each? What are your top tips in making and sticking to a budget?

Let me know in the comments section!

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  1. Can I say almost all? Haha.

    After receiving my salary, I’ll divide it into 50/30/20. Then on a spreadsheet, I’ve listed where would the 50/30/20 go. Then after listing that, I would then put it in a separate envelope or ewallet type thing.

    Although, I always recommend people to do the 50/30/20 rule. It is easier to determine what purchase is actually achievable with my current situation.

  2. Tried downloading Hey Alfred and seems there’s some glitch with the account not able to sync my Maybank accounts and the rest of the bank accounts seems not able to link with the app due to no participation.. Deleted the app right after testing for 10 mins. Would not trust apps that have glitch when it comes to money management.. Beta testing and upgrades are important before an app is launched…

    1. Hey Neven C,

      HeyAlfred has actually recently pivoted to become something else, no longer budgeting app. That’s why cannot. I’ve removed the reference

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