If you are starting out, track everything for two or three months and then set a budget per category from the real numbers. The 50/30/20 rule, envelopes and zero-based budgeting are all ways of setting those budgets, and each suits a different kind of household.
01The four methods side by side
| Method | How it works | Suits | Watch out for |
|---|---|---|---|
| 50/30/20 | How it worksHalf of your net income goes to needs, 30% to wants and 20% to saving or paying off debt. | SuitsAnyone who wants a quick rule of thumb. | Watch out forWhere rent is high, needs alone can take more than half. |
| Envelopes | How it worksEach category gets its amount at the start of the month, in cash or in a separate pot. When the envelope is empty, spending in that category stops. | SuitsPeople who overspend on day-to-day things. | Watch out forAwkward with card payments and with bills paid by direct debit. |
| Zero-based | How it worksBefore the month starts, you give all of your income a job, until nothing is left unplanned. | SuitsRegular incomes and people who like control. | Watch out forIt takes time every month, and it is hard with an irregular income. |
| Tracking first | How it worksYou write down everything for two or three months, then set budgets from what happened. | SuitsAnyone starting out. | Watch out forYou need patience before you have a plan. |
02Which one to start with
Start by tracking. Spending is easy to guess low, especially on food, eating out and small things bought online. Ask two people at the same kitchen table what they spend on groceries and you may get two different numbers, both too low. Two or three months of real numbers tell you which categories need a limit at all.
Then pick the method that suits how you spend. If you pay mostly by card, set a monthly budget per category and check it once a week. If one category keeps running over, treat that one like an envelope and give it a fixed amount.
03Bills that are not monthly
All four methods work month by month, and they all struggle with a bill that comes once a year. Add up those bills, divide by twelve and set the result aside every month. Our yearly bills planner does that sum for you.
04Doing it in Spendhog
In Spendhog you track first and then set a budget per category. A budget can repeat every 1, 2, 3, 6 or 12 months, so a yearly bill gets a yearly budget. The month is explained in words, compared with your own usual month, so you can see which category moved.
Questions about this page? Reach us any time and we'll walk you through it. info@spendhog.com