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4 Easy Budgeting Systems to Try for Financial Literacy Month

Budgeting doesn't have to be complicated. Check out these four easy budgeting systems to help you take better control of your finances!

With April being National Financial Literacy Month in the U.S, many organizations are taking steps to raise the understanding of basic financial concepts in the public at large. And with most, if not all, of these initiatives, there will be a heavy focus on budgeting.

This makes sense as being able to follow a budget is often the key to accomplishing all of our other financial goals. If you aren't budgeting, there's a good chance that you're also going to struggle with saving, paying down debt, and investing too.

But while many of us understand the importance of budgeting, the process of getting started can seem daunting. The good news, though, is that budgeting doesn't have to be complicated and time-consuming. Here are four easy budgeting methods to try for Financial Literacy Month.

50/30/20 Budgeting System

The simplicity of the 50/30/20 budgeting system has helped to make it a popular choice for many new budgeters. Rather than creating a line item for each expense category, your after-tax income is allocated into three broad categories:

  • Needs: 50%
  • Wants: 30%
  • Savings and Debts: 20%

Needs (50% of your budget) are expenses that would be very difficult, if not impossible, to live without. Examples would include your mortgage or rent, groceries, utilities, gas, car, and more.

Wants (30% of your budget) may include your cable bill, restaurant spending, and travel.

The last 20% of after-tax income in the 50/30/20 budget goes toward savings and debts to help you reach your financial goals. Examples might include building up your emergency fund, paying off your credit card debt, or contributing to your retirement account.

The 50/30/20 budget provides a general baseline that can be easily tweaked to your specific situation. Those with lower incomes may need to dedicate a higher percentage of their take-home pay to needs. In this case, they may choose to use a 60/20/20 budget (60% needs, 20% wants, and 20% financial goals).

Conversely, if you have a high income or you're hoping to retire early, you may want to allocate a higher percentage of your monthly budget towards savings and debt reduction. In this situation, you might decide to build a 50/20/30 budget (50% needs, 20% wants, 30% savings and debt).

Pay-Yourself-First Budgeting System

Pay-yourself-first budgeting (also called reverse budgeting) puts your financial goals first. With this method, you immediately set aside money for savings and debt payoff whenever you get paid. Whatever is leftover is what you'll have available to spend.

For example, let's say that you're paid bi-weekly, and your after-tax paycheck amount is $3,000. In this case, you may take $300 out of each paycheck to contribute to your IRA or 401(k) and another $300 to make an extra payment towards your private student loans.

In this example, you'd have $2,400 left of each paycheck to spend ($4,800 monthly). This system could be a great option if you often find that there's no money left at the end of the month to put towards savings or debt paydown. By paying yourself first, you force yourself to prioritize these financial goals.

If you feel like this system is causing you to run short on cash in between paychecks, try to cut back on wants (like dining out, entertainment, etc.) However, if you're struggling to cover your needs (such as your rent or car payment), then you may need to reduce the amount that you "pay yourself" for each pay period.

Envelope Budgeting System

The envelope budgeting system involves keeping cash in envelopes for each of your day-to-day expenses. For example, you could create a separate cash envelope for:

  • Groceries

  • Restaurants

  • Clothing

  • Entertainment (movies, concerts, theme parks, etc.)

  • Gas

  • Home Decor/Furniture

Once per month (or after you receive each paycheck), you'll take money out of the ATM to fill your envelopes. To decide how much cash should be allocated to each envelope, you could evaluate your spending history from the past few months or look at sample budgets online.

Once an envelope is empty, you simply don't allow yourself to spend any more in that category until the next month or pay period. For this reason, the cash envelope system can be a great choice for those who are looking to reduce their discretionary spending.

There are three main downsides to the cash envelope system, however. First, it can't help you cut back on online spending. Second, carrying a lot of cash on your person can feel unsafe. And third, managing several cash envelopes can be a bit of a hassle, especially if you share expenses with someone else.

Zero-Based Budgeting System

With zero-based budgeting, your goal is to make sure that your expenses completely match your expected income down to the penny. So, for example, if you plan to earn $3,000 this month, you'd also need to budget for $3,000 of expenses.

Budgeters who use this method tend to be quite detailed with their budget categories. For example, here's what a zero-based budget might like for $3,000 of income:

  • Rent: $1,000
  • Savings: $400
  • Groceries: $400
  • Gas: $300
  • Car Payment: $250
  • Insurance: $200
  • Restaurants: $200
  • Cell Phone Bill: $100
  • Entertainment: $100
  • Clothing: $50
  • Total Expenditures and Savings: $3,000

You may want to give zero-based budgeting a try if you struggle to stay on track with less rigorous budgeting methods. For instance, let's say that you have a tendency to overspend on dining out. Since restaurants are a want, you could technically spend up to $600 on restaurants (20% of your income) in a given month with the 50/30/20 method.

But the reality is that you're most likely going to make many other non-essential purchases throughout the month, so spending $600 on restaurants would really hurt your chances of keeping your overall wants spending at or below 20%.

This is where the zero-based budget can be so helpful. By causing you to plan and track your spending in such detail, it can significantly reduce mindless overspending. It essentially works the same way as the envelope system, just without the cash-only component.

Like the envelope system, the zero-based budget requires more planning and monitoring than the simple 50/30/20 and pay-yourself-first budgets. Also, this budgeting method can be a bit difficult to put into practice if your income fluctuates from month to month.

The Bottom Line

To decide which of these budgeting systems to use, consider your goals. For example, if you're looking to cut back on spending, you may want to start with the envelope or zero-based budgeting systems.

Meanwhile, if you're looking to prioritize saving and debt payoff, the pay-your-self first budget could be a great choice. Finally, if you're looking for a percentage-based budget that provides a lot of flexibility, the 50/30/20 budget may be the way to go.

Ultimately, the best budgeting system for you is whichever one you'll feel most motivated to use on a consistent basis. If one budget isn't working for you, don't be afraid to try another until you find the one that's the right fit for your lifestyle and goals.

Clint Proctor

Clint Proctor is a freelance writer and founder of, where he writes about how students and millennials can win with money. His work has been featured in several major publications including Business Insider, U.S News and World Report, Yahoo Finance, and Forbes.