So you want to get yourself on a budgeting plan!  That’s great.  So, what’s the first step?

You may discover quickly there is no one way to do budget and the first step depends on what budgeting method you choose to use.   People use different ways to plan their money and a methodology might work better for you based on how much clarity or flexibility you want, how much time you have and how you like to think about your money.

What follows is a breakdown of three different methodologies of budgeting that you might use to manage your personal spending so that you can get an overview of the different ways before you get started..

Zero-based Budgeting

One of the most popular budgeting methodologies is zero-based budgeting.  Zero based budgeting means that you take all your income, down to the last dollar, and you decide how you will “spend” it upfront. And by “spend it” it doesn’t mean you always buy things with all your money.  Some of your spending can be on your saving goals.   Some people like to say you give every dollar a job.  Zero-based budgeting can get specific.  

So Zero-based budgeting might look something like this.

$5,000 of income each month.

$1,850 – Rent
$500 – Groceries
$400 – Car
$400 – Going Out
$125 – CellPhone
$120 – Gas
$100 – Clothes
$75 – Internet
$75 – Car Insurance
$70 – Electricity
$30 – Coffee
$30 – Credit Card Minimum Payment
$15 – Netflix
$1,160 – Left over

$500 – Pay Down Debt
$660 – Save for Retirement
$0 – Yay!  

Then as you’re spending money in each of those categories you “withdraw” from that category.  So if you spend $48.39 at the grocery store, you withdraw that money from the $500 which gives you $451.61 for the rest of the month.

Is Zero-based budgeting right for me?

Taking this approach forces you to think about your personal spending beforehand which can be helpful for you to make sure you maintain your long term goals especially when you get in the “heat of battle” when deciding what to spend during the month.  It is easier to say “No” to things when you have decided beforehand what you value.

The disadvantage of this system is it can be complex to maintain because you have to download and categorize your purchases to keep up with where you are at.  If you got strict with it too, you would need to split some transactions from stores like Walmart or Target where you purchase things in multiple categories.   Also, it doesn’t allow for flexibility you might need when managing the unpredictability of every day life or to take advantage of opportunities that come your way..  It can also require you to split some transactions to make sure they go into right categories.

Advantages of Zero-based budgeting

Forces You Think About What is Important To You

Zero based budgeting forces you to step back and take a look at what you actually have first and think about what is important to you.  It also If you allocate money to going out, then you don’t have that money to pay down debt or save for a vacation.  

Disadvantages of Zero-based budgeting

Handling mixed transactions.

If you go to Target you might buy groceries, clothes and home store items in one trip, its a good probability you might, you will need to break out the receipt from your transactions and allocate the spending to those categories when it comes to figuring out how much money you have left.

Lack of flexibility

Sometimes things happen in life and when every dollar has been given a job, it can make it limiting to take advantage of your life while you live it.  So let’s say you run into a friend who invites you to the coffee shop.  You want to go, but you did not allocate money for coffee this month. You could suggest another idea and skip the coffee but you could also take money from your entertainment budget and put it in the coffee budget.  But you do have money allocated to Entertainment.  But how much is your entertainment budget you think?  What was it that you had planned on doing with it?  

This type of budgeting might require you to move money between categories to keep up with everything.  This may be ok to handle one or twice a month, but if it gets beyond that, you may find yourself spending more time moving money between categories and managing your budget.

Requires Effort

How complex should you get with your categories?  When planning, it can be tempting to categorize alot of spending for accuracy.  The more specific you get, it feels like the better planning you will do, but too many categories can get unwieldy.  In Quicken for example, there are categories for Restaurants, Fast Food and Coffee Shops.  But these could also be unified into one category for Eating Out.  This method requires you to be pretty accurate about your spending behaviors, both as they are currently and as you want them to be.  

What is the Cash Envelope System?

Cash envelope system is not a different budgeting system; it is the zero-based budgeting system but it uses cash and envelopes to let you know how much you have left in each category.  So, when you allocate $300 to groceries, you get $300 out of the bank in cash and you add it to an envelope called “Groceries” and you spend out of that. 

Having cash in an envelope makes real and tactical how much money is left to spend in each category.  Also when people spend actual dollars vs digital money, they tend to want to hold onto it more so you subconsciously spend less.

The downside of using Cash Envelopes is that its not very practical in today’s digital economy, – especially in the post-COVID world where it seems you have to scan a QR code to facilitate even basic transactions. Also there are the logistical and safety issues of carrying around so much cash.  

50 / 30 / 20 Budget

50 / 30 / 20 budgeting is more a way of thinking about how much money you “should” be allocating to different areas of your life to make sure you have enough to enjoy your life but also save for your future self..  The idea is that you should target 50% of your income to necessities, 30% to wants and 20% to savings and paying off debt.

So if you make 

You have $5,000 of income each month, you spend 

$2,500 on Necessities,
$1,500 on Wants and
$1,000 on Savings Or Paying off Debt.

So examples of Necessities include

  • Mortgage or rent payments
  • Water, Electricity or Power Bills
  • Health Care
  • Basic groceries
  • Child Care Cost
  • Basic Transportation Costs

Wants, or discretionary spending, are things like

  • Dining out
  • Entertainment
  • Travel
  • Nice Cars 
  • Fancy Groceries

Savings and Debt Payments are

  • Paying off Loans
  • Paying Down Credit Cards
  • Growing Retirement Savings
  • Building Emergency Funds

This upfront tells you how much you can spend on different areas of your life.  So, if you make $5,000 a month, your rent should probably not be $2,300 because the extra $200 a month will not cover your basic groceries and rest of the utilities.  Now you could just spend more discretionary spending on a nicer place but human nature is that you will probably want other this and social interaction that costs money outside of the home and you don’t want to put yourself in a box and be “house poor”.

Advantages of 50 / 30 / 20 Budget

It scales

What is nice about this approach is that it scales with different income levels (because even rich people can go broke).  So whether you make $2,000 or $20,000 dollars a month, it can keep both people on track ensuring their future selves have enough money

Its gives a common values filter

One of the most important things to understand about spending money is that its best when its done based on what you value.  So if you truly value social interaction and can live modestly, you can make a 30/50/20 rule work for you.  But the 50/30/20 rule adds a “common human” value filter onto money.  It cautions you against getting to excited about any particular area and especially encourages you to save for your future self.

Disadvantages of 50 / 30 / 20 Budget

Want vs Need Categorization

There can be some gnarliness when deciding if something is a want or need.  So take the choice of what type of car for example. You may need transportation but if you get a Mercedes, then some portion of that expense is more want than need because you could have gotten the Corolla and saved money.  

It might not match your values

If you have heard the maxim don’t use life to build money, use money to build a life.  The things that truly make you happy might not fit into these categories so easily.   So if you wanted to live frugally and travel the world, it would not match the 50 / 30 / 20, but it would still be a happy life for you.

One Number Budget 

This is the method of budgeting that Weekly invented!

This method is a tactical approach that maximizes flexibility and reduced complexity while still keeping you on track.  One Number budget breaks free from the categorization required by Zero based budgeting and also avoids the subtleties around defining transactions as “Wants or Needs” in the 50/30/20 budget.  It does this by focusing on what is actually happening in your life and letting you know what is safe-to-spend based on your commitments.  

To set up this type of budget, Step 1 is to collect all your recurring expenses.  A recurring expense is defined as a payment that is the same amount each time and occurs at regular intervals (usually monthly).  These can be things like rent, subscriptions, utilities.  Step 2 is to decide what you want the contribution to your savings goals to be.    Step 3 is to subtract your recurring expenses and the contributions to your savings goals from your regular income.  What is left over to spend on discretionary spending.  As long as you don’t spend more than what is left over then you are on track and don’t have to worry about categorization.  To keep the discretionary number from being to large, you can break it down into weekly portions.

Let’s look at the same budget we used for the 50 / 30 / 20 but instead apply One Number budget.

$5,000 of income each month.


$1,850 – Rent
$400 – Car Payment
$125 – CellPhone
$75 – Internet
$75 – Car Insurance
$70 – Electricity
$30 – Credit Card Minimum Payment
$15 – Netflix
$300 – Vacation (Savings Goal)
$500 – Pay down debt (Savings Goal)

Left Over
$1,635 per month or

$380 per week ← This is your “One Number”

Notice the categories of gas and groceries have been taken out of budget because they are not set amounts and they can change based on how you shop and how you travel.  Instead all of the non-recurring expenses are but into one “bucket” which reduces the need for categorization.

You can then portion out this discretionary budget on a weekly basis which kind of makes it like an adult allowance.   But this allowance number has all your current obligations as well as your future wants and needs factored in.  This is your “One Number”.  

Doing it this simple way allows you to make decisions in the moment.  It is also lighter weight and doesn’t require a great deal of work.

The nice thing about the One Number method is that although it doesn’t label expenses as wants vs needs, recurring expenses, like rent and utilities, are often your needs.  Although there are exceptions — take Netflix for example that is a recurring expense that could be considered wants more than needs.

Advantages of the One Number Budget

Easy to Maintain

When you don’t have to think about really and categories at all, it’s easier to move through your day.

Easy to Understand

You have regular income and recurring expenses that must be paid.   The rest is discretionary you can spend it as you like.  That’s pretty simple.

Neither Advantage Nor Disadvantage – Just Is

Value judgements done outside the system

The decisions about value are largely left outside of the system.  How much you spend on rent or eating out, this system doesn’t judge.  But if you have no discretionary spending after you pay all your recurring expenses you are going to be in trouble because you haven’t gotten groceries yet.   If you don’t have enough money for your discretionary spending, you need to look at and reduce your recurring expenses.  It is then that you might be forced to judge whether you recurring expenses are adding value to your life and if something you are paying for regularly is a want or a need.

Disadvantages of One Number Budget

Have to mentally be aware of your variable but important expenses

Because gas and groceries are not recurring and can vary based on behaviors, they are considered discretionary.  But these can also be important.  It’s not like you can go clubbing, spend all your discretionary spending and then be OK for the rest of the week or month.  So you have to be mentally aware of what you need for gas and groceries.  Breaking your discretionary spending up on a weekly basis helps with this though.


In the article, we have reviewed three budgeting systems and how they work: Zero budgeting, 50/30/20 and the One Number.  There are advantages and disadvantages to each. The important part is to try one and see if it works for you.