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Creating an Effective Budget: Finding Your Perfect Style

Updated: Jan 19

The type of budget (spending plan) you decide to use is as unique as your fingerprint. Okay, maybe that's too far, but it's definitely a personal preference. In this blog post, you'll see the different types of budgets and what each entails. As you read through the options, consider the pros/cons of each one before you decide where to start. And you always mix and match from pieces of each and create your own style! And, if you want to back up a step and learn more about what a budget/spending plan is, here's a blog post that covers it.


Before we dive into the methods, I'd like to share some helpful overarching philosophies: Zero-Based & Buckets of Money.


With this philosophy, each dollar is given a job.


Your monthly take-home = $12,200

Investments/Retirement = $1,850

Expenses = $8,200

What's Left = $2,150

Now, you decide what to do with that $2,150. Will it be transferred to your High Yield Savings Account to be used on vacation? Do you need it to replenish your emergency fund? Do you have your eye on a course you'd like to take?

That is giving every dollar *a job.*

Without the zero-based philosophy, you'd just leave it in your checking account. Two things work against you there.

  1. You earn next to no interest in your checking account. Hoarding money there is not your best option.

  2. If there is something you are saving up for, how will you know if you've saved enough? Your checking account has money in it that's already allocated, so just looking at that balance will lead to spending more than you actually have.

A caveat-- I love the zero-based budgeting philosophy. I apply it to all the budgeting methods outlined below.

Buckets of Money

Think of your checking/savings accounts as a container for your buckets of money. You have a bucket for your mortgage/rent, a bucket for shopping, vacations, gifts throughout the year, etc.

a line of old silver budgets, all of varying sizes

Various Budgeting/Spending Plan Options

As I mentioned above, everyone's preference is different regarding the level of detail you want to see and the modality you wish to use. Some folks love keeping it in a notebook, others live for their Excel spreadsheet, and many prefer an app connected to their debit/credit card accounts.

The one main thing to remember is... try something. If it doesn't work for you, move on to the next. Don't just give up.

Line Item Budgeting

If you like lots of detail and diving into the nitty gritty, this method is for you!

It is indeed the most granular of the approaches. You create categories for all of your expenditures, for example:





You can get even more detailed if you want to reduce spending in a specific area. For example, many folks decide to split their food category into groceries and restaurants.

Line item budgeting works with any system: paper/pencil, spreadsheet, or an app.

screenshot of a Google spreadsheet line item budget

Inflow Calendar

If you like to look at things through a cash flow lens, this option is for you!

Using a monthly calendar, document what money you have coming in for the month on which dates.

NOTE: I almost always recommend establishing a cadence with paying yourself for you variable income earners, but it's especially crucial if you're using this model!

Then, document what bills you have going out during that same time period, ensuring the inflow exceeds the outflow. If it doesn't, now would be a good time to call your mortgage company, credit card company, or loan provider and request a change in the due date. Most entities are very flexible when it comes to due dates. They want your money and would rather not chase you down for it.

Lastly, using the zero-budget philosophy, you can determine how to best use the "leftover money."

In the example captured in the image below, I opted to use blue to represent money coming/going from that bucket and red coming/going from the other bucket.

screenshot of a calendar showing some income and some bills


If you like playing with percentages, this is the budget for you!

Based on what you earn in the month:

50% gets allocated to essential items --aka needs

ex: housing, loans/credit cards, utilities, groceries, health care, etc.

30% gets allocated to lifestyle items -- aka wants

ex: shopping, hair, nails, fitness, etc.

20% gets allocated to savings

ex: retirement, vacays, vehicles, etc.

a budget example showing three columns: essentials, lifestyle, savings

The One Number

AKA the "No Budget"

If you aren't a fan of tracking lots of detail, this is the budget for you!

Step 1: determine how much you want to save this month

Step 2: determine all the essential (required) items you have to pay

Step 3: what's left is your 'One Number' -- which you get to use however you like

HOT TIP: Some folks like to have two separate checking accounts (or credit cards) to make this easier: one to pay for all the required items and one for everything else. That way, you can quickly see how much you have left in that bucket of money at any moment.

a screenshot from a budgeting app showing two categories, essentials and everything else

Excellent work; you've made it through each of the options! For good measure, here's the list one more time:

Line Item Budgeting

Inflow Calendar


The One Number

Bottom Line

Budgets/spending plans are like living, breathing documents. They bend and move with you. They aren't perfect, and you won't be perfect using one, and that's okay. But eventually, you find more freedom! So, pick a place to start and try something out. If it doesn't work, don't give up--try another option.

Here's to you,

Melissa Mittelstaedt

Money Coach | Accredited Financial Counselor®


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