Finding your budgeting style

We've talked previously about why you should make a budget, but how you budget is equally important.

Choosing the right budgeting style for you will depend on both how much money you have available and your personal financial goals.

Some people, for example, might like to know where every last penny of their income is going, some might like to focus on saving whereas others might prefer to use their budget to change their relationship with money.

Here we look at some of the best tried-and-tested budgeting styles to help you get the most out of your money.

50:30:20

The idea here is that you allocate 50% of your income to things you need, 30% to things you want, and put 20% towards savings.

Your needs are your priority spendings, including things like housing, food, childcare and debt repayments.

Your wants are everything that's non-essential, such as a meal out, a holiday or some new clothes.

Your savings includes money that you put by to build up to something big like a house or use as a safety net for emergency costs.

Great for: people who have a sizeable income but aren't sure where to direct their money. This system allows you to have a clear idea of where your money's going without having to fuss over categories beyond wants/needs/savings. That means that you can enjoy an increased sense of financial freedom and control and quickly start saving money.

Not so great for: people who aren't earning much. Not everybody has the luxury of buying things they want or saving up, and it can be demoralising having to put your entire salary towards necessities.

Remember that these percentage splits are not set in stone. You can adapt them to fit you and your personal situation. If, for example, you are in a lot of debt, your 'needs' category might be higher while your 'savings' category is reduced so that you give yourself the space to get on top of your debt.

Zero-based

This is where you assign a purpose for every last penny.

This doesn't mean that you'll be left with a bank balance of 0 at the end of the month, since you can allocate a certain amount of money towards savings. It just means that there'll be no money lying around at the end for you to fritter away.

Great for: people who like having a lot of control over their spendings and knowing where every last bit is going. This method also works really well for those who have a tendency to waste money on meaningless purchases instead of putting it towards things that could holder greater value such as spendings or investment.

Not so great for: those who want a budget quick. This method takes time and requires you to stay on top of it regularly. To make things easier, there are some great budgeting apps out there such as Cleo which make it easy to assign budgets to different categories and set financial goals at the tap of a finger.

Kakeibo

Pronounced 'kah-keh'boh', Kakeibo is more than just a budgeting style - it's a reflective practice that brings mindfulness to money management.

Created in 1904 by Japan's first female journalist Hani Motoko, Kakeibo aims to place the emphasis on spending well, rather than focusing on what you cannot spend.

It's a simple practise that first asks you to ponder four questions at the start of each month:

1. How much money do you have available?

This is your total income minus your fixed expenditure (such as bills, rent or mortgage, and debt repayments).

2. How much would you like to save?

Decide on a realistic amount that you can put by each month. It's a good idea to start small and work up. You will find that it becomes easier to put more by as you get more accomplished at the art of Kakeibo.

Then subtract this from the amount of money you have available. This is the amount you have left to spend on non-fixed expenditures.

Divide by the number of weeks to your next pay day to calculate your weekly expenditure budget.

3. How much are you spending?

This part asks you to write down everything (yes, everything!) that you spend each day. It's good practise to keep a little journey that you can carry about. Writing things down in real-time, pen to paper, helps you to slow down, focus on the present moment and ponder the effects of your spending.

Kakeibo traditionally divides spending into four categories:

Survival - aside from fixed payments such as bills, rent and debt (which you should have already budgeted for when you worked out your money available), jot down all the necessities that fluctuate each month. This includes things like food, medical prescriptions and childcare.

Culture - such as books, Netflix, cinema tickets and music concerts.

Optional - these are the things you don't need but choose to do, such as having drinks with friends or going shopping.

Extra - all the unforeseen expenses such as a car repair, as well as things that can't be budgeted for on a monthly basis such as birthdays.

4. How can you improve?

Review and reflect upon your spending on a weekly and monthly basis. This allows you to identify areas where you can cut back and work out how you could put more money towards savings.

Great for: people who want to bring mindfulness and intention to their spending. With a focus on quality rather than quantity, it's a good match for those who want to ensure their money goes towards things that will bring joy to their lives.

Not so great for: people who find it difficult to stay organised. As soon as you start forgetting to write everything down, Kakeibo can become less peaceful, more painful. It's also not something that allows you to get in control of your money quickly. As a reflective process, it requires time and space to master.

The envelope system

This involves subtracting your priority spendings (such as rent, bills, debt repayment and childcare) from your income to work out how much you have left over each month, then dividing this amount equally into envelopes for the number of weeks in the month. Some people also like to assign different envelopes for different categories, such as food, shopping or gifts.

Once the money's gone, it's gone!

Great for: people who have a tendency to overspend, especially on credit cards. By having the physical money, it's easier to visualise how much (or little) you have left as well as how quickly you're getting through it.

Not so great for: people who regularly shop online, or are prone to losing things. If you misplace an envelope, that's your monthly spendings gone.

Paper or digital?

Alongside choosing a budgeting style that works for you, you might want to consider whether using pen and paper or going digital will suit you best.

There are some great free budgeting apps that use Open Banking to link up all of your various accounts and analyse your spending automatically. Some of our favourites are:

We've talked previously about why you should make a budget, but how you budget is equally important.

Choosing the right budgeting style for you will depend on both how much money you have available and your personal financial goals.

Some people, for example, might like to know where every last penny of their income is going, some might like to focus on saving whereas others might prefer to use their budget to change their relationship with money.

Here we look at some of the best tried-and-tested budgeting styles to help you get the most out of your money.

50:30:20

The idea here is that you allocate 50% of your income to things you need, 30% to things you want, and put 20% towards savings.

Your needs are your priority spendings, including things like housing, food, childcare and debt repayments.

Your wants are everything that's non-essential, such as a meal out, a holiday or some new clothes.

Your savings includes money that you put by to build up to something big like a house or use as a safety net for emergency costs.

Great for: people who have a sizeable income but aren't sure where to direct their money. This system allows you to have a clear idea of where your money's going without having to fuss over categories beyond wants/needs/savings. That means that you can enjoy an increased sense of financial freedom and control and quickly start saving money.

Not so great for: people who aren't earning much. Not everybody has the luxury of buying things they want or saving up, and it can be demoralising having to put your entire salary towards necessities.

Remember that these percentage splits are not set in stone. You can adapt them to fit you and your personal situation. If, for example, you are in a lot of debt, your 'needs' category might be higher while your 'savings' category is reduced so that you give yourself the space to get on top of your debt.

Zero-based

This is where you assign a purpose for every last penny.

This doesn't mean that you'll be left with a bank balance of 0 at the end of the month, since you can allocate a certain amount of money towards savings. It just means that there'll be no money lying around at the end for you to fritter away.

Great for: people who like having a lot of control over their spendings and knowing where every last bit is going. This method also works really well for those who have a tendency to waste money on meaningless purchases instead of putting it towards things that could holder greater value such as spendings or investment.

Not so great for: those who want a budget quick. This method takes time and requires you to stay on top of it regularly. To make things easier, there are some great budgeting apps out there such as Cleo which make it easy to assign budgets to different categories and set financial goals at the tap of a finger.

Kakeibo

Pronounced 'kah-keh'boh', Kakeibo is more than just a budgeting style - it's a reflective practice that brings mindfulness to money management.

Created in 1904 by Japan's first female journalist Hani Motoko, Kakeibo aims to place the emphasis on spending well, rather than focusing on what you cannot spend.

It's a simple practise that first asks you to ponder four questions at the start of each month:

1. How much money do you have available?

This is your total income minus your fixed expenditure (such as bills, rent or mortgage, and debt repayments).

2. How much would you like to save?

Decide on a realistic amount that you can put by each month. It's a good idea to start small and work up. You will find that it becomes easier to put more by as you get more accomplished at the art of Kakeibo.

Then subtract this from the amount of money you have available. This is the amount you have left to spend on non-fixed expenditures.

Divide by the number of weeks to your next pay day to calculate your weekly expenditure budget.

3. How much are you spending?

This part asks you to write down everything (yes, everything!) that you spend each day. It's good practise to keep a little journey that you can carry about. Writing things down in real-time, pen to paper, helps you to slow down, focus on the present moment and ponder the effects of your spending.

Kakeibo traditionally divides spending into four categories:

Survival - aside from fixed payments such as bills, rent and debt (which you should have already budgeted for when you worked out your money available), jot down all the necessities that fluctuate each month. This includes things like food, medical prescriptions and childcare.

Culture - such as books, Netflix, cinema tickets and music concerts.

Optional - these are the things you don't need but choose to do, such as having drinks with friends or going shopping.

Extra - all the unforeseen expenses such as a car repair, as well as things that can't be budgeted for on a monthly basis such as birthdays.

4. How can you improve?

Review and reflect upon your spending on a weekly and monthly basis. This allows you to identify areas where you can cut back and work out how you could put more money towards savings.

Great for: people who want to bring mindfulness and intention to their spending. With a focus on quality rather than quantity, it's a good match for those who want to ensure their money goes towards things that will bring joy to their lives.

Not so great for: people who find it difficult to stay organised. As soon as you start forgetting to write everything down, Kakeibo can become less peaceful, more painful. It's also not something that allows you to get in control of your money quickly. As a reflective process, it requires time and space to master.

The envelope system

This involves subtracting your priority spendings (such as rent, bills, debt repayment and childcare) from your income to work out how much you have left over each month, then dividing this amount equally into envelopes for the number of weeks in the month. Some people also like to assign different envelopes for different categories, such as food, shopping or gifts.

Once the money's gone, it's gone!

Great for: people who have a tendency to overspend, especially on credit cards. By having the physical money, it's easier to visualise how much (or little) you have left as well as how quickly you're getting through it.

Not so great for: people who regularly shop online, or are prone to losing things. If you misplace an envelope, that's your monthly spendings gone.

Paper or digital?

Alongside choosing a budgeting style that works for you, you might want to consider whether using pen and paper or going digital will suit you best.

There are some great free budgeting apps that use Open Banking to link up all of your various accounts and analyse your spending automatically. Some of our favourites are:

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