10 Types of Personal Budgets to Know


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The traditional budget is the most common and simple types of personal budgets every individual uses but they are also other types you should know.

If you have created several personal budgets and each time unable to meet your financial goals. Then it means you have all along created the wrong type of personal budget.


It is important to note that as we have different financial goals we also have different types of personal budgets. If you take out time to understand the different types, you will choose the right one for your financial needs.

types of budget

What are the different types of personal budgets?

We have different types of personal budget but know that what appeal to you may not appeal to someone else.  This means no special or main type of budget is deemed the best.

In most cases, people would like to try out several methods to know the one that suits them.

Sometimes we reason that as far as personal budget is concerned it involves creating a list of expenses that correspond with your available income.

But the question is, when you choose this method do you achieve good result? Either yes or no, in this article you will learn other different types of personal budget you need to know. Now you will be able to discern if you are doing the right or wrong thing.

1. Goal-based budget

This type of budget involves making a systematic plan on how to achieve an objective. It may be long-term or short-term depending on your choice or plan.

Normally you create a budget that involves tracking your income and expenses as usually the case. A goal-based budget points directly to achieving a specific goal.

For instance, you may have several objectives you would want to accomplish shortly. Those objectives such as: building a house, sponsoring a Child’s education, and paying off debts.

These goals may take quite a long time to achieve, but they are your main target when creating a budget. Therefore, you will always priorities them according to their importance. Then on a monthly basis when your earnings arrive, determine what specific amount to set aside towards realizing these goals.

Always maintain this formula and work towards establishing your objectives. You can still adjust the specific amount or revisit your goals when necessary. Once you allot a specific amount of your income towards your goals you can spend the rest on other things.

2. Spending cap budget

In this type of budget, you will determine within you the actual amount you will spend out of your total earnings for the month.  This amount includes your savings, emergency fund, and every other expense.

Then once you exhaust this amount you agreed on, whatever remains from your earnings is free for you. You may keep it for your miscellaneous expenses or add it to your savings or emergency fund.  

For instance, if you earn $10,000 monthly, then using a spending cap budget you may decide to spend $8,000 on every expense and savings you want to make for the month. Once you spend up to this amount you stop, then the remaining $2000 is free.  

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3. Basic/traditional budget

The traditional budget is the type of budget every individual or household make use of. It is very common and simple, the type which an individual use in keeping record of their monthly income and expense.

In this method, you list all income and expenses subtract your income from your expenses, and make adjustments if necessary to get a balanced budget. You can also get a surplus budget but make sure not to arrive at deficit which can lead to debt. Learn more on how to create a personal budget in 8 ways.


4. Zero-based Budget

The zero-based budget is the type where all your earnings are allotted to spending. For each month you create a budget that contains all your expenses, make sure to include savings, investment, and emergency funds. Then at the end, you will have zero money left.

This is similar to basic budget but the slight difference is when it comes to zero budget you will have nothing left. While in basic or traditional budget you may still have something left after subtracting your income from your expenses. However, it is not compulsury you must spend all your money.

5. 60/30/10 budget

The 60/30/10 budget uses percentages to apportion your earnings to different expenses. This method can serve as a guideline when you are having recurring monthly expenses. It is like forecasting where your earnings should go.

For instance, you may assign 60% to fixed expenses. Allot 30% to variable expenses, then 10% to savings and emergencies. Sometimes too their might be need for you to make adjustments of either reducing or increasing the percentages. Such times as: during inflation or increment in your earnings.

6. Pay yourself first

This budget uses self-prioritization method. Every person or household needs savings, the entrepreneur or organization needs savings. Savings is important for you to have a hands-on in time of emergency or to finance future goals.

The pay-yourself budget is prioritizing your savings or investing a portion of your income each time your earnings arrive. After paying yourself fist, then you can distribute the remains to other expenses.    

7. Digital budget

In recent times digitalization is fast taking every area of human activities. Many apps are now available online to help create personal budgets. These apps or digital tools can help track your expenses and set up your financial goals.

For instance, rather than using a pen and paper you could subscribe or download a budget app to help you create it. We have some digital budget apps like Mint, you need a budget (YNB), and more.

Note: they would make use of your credit card and bank account when streamlining your budget process. It uses an automation method therefore you can also set up your savings transfer, and track your expenses and other transactions.    

8. Cash flow budget

This budget method uses timing to track your income and expenses; the goal is to ensure you always have cash for your financial needs.  

How does it happen, list all your sources of income and your expected expenses then set a time or date at which your earnings will arrive. Then assign each expense to the actual time the income will arrival.

With this you could be able to plan ahead and decide how to handle your finances.  If you foresee a decline you quickly find a solution to cover up.

This method is most suitable for individuals who are self employed and would not have to wait or rely on a monthly paycheck.  

9. Envelope budget 

The envelope method involves allotting cash to different envelopes, each one bearing the name of the expenses. Each time you want to spend you locate the particular envelope that has the expenses and spend from it.  Any envelope that you exhaust the money means you cannot make any expenses on that item until the next budget.

For instance, if your monthly paycheck is $5,000 and your expenses are fixed, variable, and emergency. You will need to provide three envelops for these estimates and assign different amounts to them. If you exhaust the money in each envelop then you will have nothing to spend from that envelop.  

10. Incremental budget

Using the incremental budget allows you to make adjustments, whether you are increasing or decreasing. With it you do not have to rely on a permanent budget. As time goes your earnings or financial constraints might push you to make some changes within your estimates. Then you will have to make changes of either subtracting or adding to your budget.

What is your conclusion?

Now that you understand the different types of personal budgets what do you think? You may find it a great idea to divert from your usual method of traditional budget to perhaps another method that will help you realize future goals. You may otherwise choose to try out four methods before finally arriving at a concrete decision.

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