Which Of These 5 Budgeting Systems Do You Use?


Blueprint for Financial Prosperity recently wrote a post which gave a brief look at 5 different budgeting systems.

Here is a summary of the different methods mentioned, along with my own thoughts on each of them.

  1. Envelope budgeting – not tried this one myself yet, it’s where you put an amount of money in an envelope and allocate that to a certain expense (e.g. food, petrol). This got me thinking, are there any online bank accounts that let you cut your money up into different “virtual envelopes” (or “folders”) to recreate a similar thing online. I guess the problem with that would be that unless you’re paying for things directly from your online account, the money will just come out of your overall pot, not a specific envelope. So that might be a stupid idea. Perhaps there’s a way of doing it with different accounts. Or perhaps I’m complicating it too much. Just use real envelopes, ok?
  2. Reverse budgeting – put money aside for savings first, then whatever’s left you can use for spending. This is what I’m currently trying to do, with little success, to be honest.
  3. Tracking to the penny – I’ve tried this budgeting method in the past (remember my experiments with Expensr?), and although it is really good for keeping track of every single penny that gets spent, it does take a lot of work and a good memory. It’s probably not something you’d want to do month in month out, but if you find you’re spending way more than you earn, then it’s worth doing it for a month or two to identify where your real money leaks are.
  4. Tracking to the pound (or dollar) – same as above, but you don’t worry about the pennies, you ust round to the nearest pound. In time, the rounding should make it reasonably accurate, and it should take a little less effort than tracking to the penny.
  5. The “no budgeting” budget system – can doing nothing be called a system? I’m guilty of doing this most of the time, and I’m guessing that a large proportion of the population do it too. All of your money goes into one big pot, and gradually disappears to who knows where. No budget, no effort.

So what budgeting system do you use? One or a combination of the above or something completely different? And what tools do you use to track your budgets? Let us know in the comments.

4 thoughts on “Which Of These 5 Budgeting Systems Do You Use?

  1. I used to do budget-to-the-penny using Quicken (about ten years ago), but got out of the habit when I got married, gained some kids, and lost some (all) my ‘spare’ time ;)

    These days I use a budget method you haven’t listed – boredom-based-budgeting. We have certain fixed costs, and standard grocery shopping, and fixed savings and investment loan servicing costs. So basically nothing changes from week to week, or month to month. If we just stick to our everyday routine the budget looks after itself.

  2. I use a combination of 1 and 4. 3 out of the 12 months in a year I do detailed budgeting to check I am tracking to budget, the rest of the time it is just back of the envelope. If I notice a big variance in my credit card bills or a known income change I go back to detailed budgeting. I am writing a post on this “blended” budgeting in the near future.


    Great to discover your blog as well.

  3. Budgeting-to-the-penny I have to admit. It sounds incredibly boring and tedious, but I just started to ask for receipts for everything I buy and at the end of the week I sit down for a few minutes and enter everything into my beloved spreadsheet… it’s easy, simple and finally something I can stick to… :-)

  4. Reverse budgeting. Savings go into savings account, bills/rent/groceries go into joint account, anything left in my account is mine to spend however I want.

    Great site btw.

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