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.