4 Practical Budgets For People Bad With Money

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Upon another journey to help out my budgety blind, overspendy, financially shipwreck of a friend Soapy (love her but it’s true) I’ve developed a series that poses aid for people who were not born or raised with a set of frugal genes. In knowing her, I have had the fortune of hearing her side of the story and gauging her relationship with her money. A key fact is she simply does not have a penny to her name and is drawing $80,000 in debt, the majority of which is bad consumer credit card debt.


Read the previous post in Soapy’s series: 21 Frugal Pantry Staples List on a Limited Budget

This is where the personal financial nerd comes out…

– How cool is it that we can paint all the colors of the wind in budgets?

– How cool is every financial milestone and progress we make? To give ourselves that amazing pat on the back knowing we made ourselves a little better?

– How cool is it we get to get creative, self-explore and create a blank financial canvas designed for our priorities and needs?

Personal finance is too freakin’ cool!!!

4 Types of Budget for Over-Spenders

Most people take their voyager into budgeting starting off with a free traditional spreadsheet like this one. The basic budget works for most people because it is simply a summary of what numbers you have coming in vs going out.

Related: Our Google Doc Budget Template – Download w/e-mail

not a shackle of spending limits but a reminder of what's important to ourselves.-min
My motto!

But there are lots of different budget systems out there and they work differently for different people.

You get to draw out a budget that is tailored to you by being creative and making it yours.

Managing personal finances is one of the most important life skills a person can learn. Budgeting is right up there with walking, bladder control, and reading.

This is a rundown of 4 different budgets geared towards general overspenders.

1. The Envelope Method

The envelope system is an all-cash method where you divide up money based on budgeted categories and put that money into different envelopes. This all-cash method prevents overspending and is very tangible for overspenders. 

Budget this method by paycheck.

This is also known as the clip method because envelopes tend to get messy when you can simply have a binder clip in place of envelopes. Or use an accordion folder or multi-flapped wallet instead of envelopes.

Three Easy Steps

1. Determine how much you have from paying the bills to saving for retirement. Once you know how much money is left from those obligatory expenses, divide it up into living expenses such as rent, transportation, groceries etc. Label envelopes with different categories that apply to expenses.

2. Divide and stuff the envelopes with money. Only spend money out of the envelopes for its corresponding category. If you are going to for gas, bring the transportation cash envelope with you.

3. Do not borrow money from other envelopes. Once the envelope is empty then it is game over until next time.


Easy to understand and easy to do with menial effort. There is no such thing as “overspending” for extras with the all-cash envelope method.


The biggest disadvantage is carrying bulks of cash around. It is less secure compared to swiping with a credit card. Another disadvantage is you cannot track your itemized expenditures compare to traditional spreadsheets or leave paper trails like credit cards. The last drawback is possibly missing out on credit card purchase protections and reward points but those are a very small price to pay for being able to avoid credit card debt in totality.


2. The Zero-Based Method

Initially, I was perplexed by the popularity of this method but research has shown this budgeting method as effective for habitual overspenders. Zero-Based methods in personal finance budgeting has just one must-follow rule which is the monthly total needs to equal to zero. That simply means your income minus all your expenses need to equal zero.

Three Easy Steps

1. List out all bills and expenses for the month. Make it detailed and honest.

2. Mark every expense incoming in the beginning of every month and include special expenses such as birthday gift or insurance renewal.

3. Subtract incoming monthly income from expenses including all debts. Done correctly, the remaining amount should be close to a zero. This take practice but it offers less rigidity compared to the envelope method.


Zero-based budgeting teaches you to not overspend past earnings. The zero-based method is a great pairing with having an emergency fund. Using these two as combos make it a great tool for overspenders.


Our utility bill is charged in bulk once every two months instead of monthly and the figures vary rather largely between summer and winter months. The zero-based budget does not address for unforeseen circumstances in any particular month beyond the scope of income coming in vs expenses going out.


3. The Goal Digger

This particular one is my favorite budgeting methods. I named it after a popular hashtag on Instagram that made me giggle. The Goal Digger is effective for the starlets like me with big dreams in mind. This budget treats you to the occasional nice things in life after successfully staying within your budgeted appropriations.

Three Easy Steps

1. Limit just one goal and focus in on it. This goal is the basis of your psychological foothold on corrective spending. It must be influencing and doable (nothing too mighty).

2. If you have debt, work on focusing expenses on that goal in order to prioritize saving. This includes making sacrifices, not living in or spending in the now like a toddler, over a craving.

3. Open up a separate account and set aside the amount saved for that specific goal in mind until it is reached.


A single goal provides intrinsic (inner) value and extrinsic (external) rewards which is powerful against a habitual overspender. It teaches the value of patience which is one of the main pillars of personal finance and wealth accumulation. 


Do not use this budget if you have large debts. If the budgeter has debt, it is harder to use this method because the debt itself might be too sizable to be effective long-term. For overspenders who are reckless with high-interest debts, it shouldn’t warrant a “reward.” The debt must come first. However, for people without much debt, this is my favorite method of budgeting.


4. The Percentages Method

The percentage method is under the same concept as the 80/20 method or the 50/30/20 method. It is simply a wider range breakdown of a budgeted category for the most important expenses for people who want to skip detailed itemized plans. Percentages are generally up to the budgeter. The 80/20 method is simply 20% going to saving and 80% going to everything else under the money sun from debt to rent to shoes. The 50/30/20 method goes to necessities such as shelter, food, electricity. The 30% goes to items labeled as wants such as ice cream or jewelry and 20% goes into paying back debt.

National Average Budget % for Net Income [Source]
CategoryPercent of Overall Spending
Housing (mortgage/rent, Real estate taxes)24%
Utilities (water, power, garbage collection,8%
Donations/Gifts to Charity4%
Savings and Insurance9%
Entertainment and Recreation5%
Transportation (car payments, gas, service)14%
Personal/Debt Payments/Misc12%

 Three Easy Steps

1. Calculate each expense in relation to income in percentages. For example, if rent is $1,000 a month and net income is $4,000 a month then the housing category would be set to 25% of overall spending out of 100%.

2. Trim overall spending percentages down and priorptize catgeories such as personal debts first after saving for an emergency fund.

3. Make sure the spending percentages are accurately reflected and the total equals to no more than 100% of your net income.


Percentage methods are best suited for those who hate to itemize and have a hard time tracking detailed numerical figures.


Generally, the weakness of percentages is the lack of disciplinary categorizations such as what divides the needs vs wants for overspenders. Percentages of spending also vary wildly depending on location. Soapy lives in an HCOL city in Canada which means her housing expense ratio would be a lot higher than someone from Tennessee. The percentage rules tend to be more relaxed in terms of debt payoff and saving as well. The 50/30/20 rule with 20% going into debt is not enough. The 80/20 rule with 20% going into savings is the bare minimum a person should be saving. 



You can mix and match budgeting methods and principles. There are also great supplements to budgeting like using the Zero Day Challenge (my review of ZDC) in correspondence to any of the budgeting methods mentioned above. It is important to tailor your finance in a personal way and experiment with what clicks. The overreaching important aspect of keeping a budget is to keep it consistent. A lot of financial circumstances stand different so take the above four budgets as a guideline to start and then make it yours based on your needs and desires.

Remember, a budget is not a shackle but a better way of organizing priorities.

Readers, which method of budgeting do you use and why? Did I neglect to mention another important subset of spending and tracking?

Want to master your finances effortlessly?

1. Sign up here with your email to download our free Google Sheet budget template.

2. Sign up with Personal Capital and use their automatic Net Worth Tracker for free. PC is a free financial service platform that helps you analyze your financial health all on one simple & secure account. This was a huge step up from the tedious dance we did before where we had to manually log in to our financial accounts (all 19 of them) individually.

29 thoughts on “4 Practical Budgets For People Bad With Money”

  • These are great, Lily. And I have used three of the four! Well, that’s not true. I’ve used four of four, but I really didn’t like the envelope method so I abandoned that in favor of zero-based budgeting when we first started our budgeting journey. 🙂

    Currently, I’m trying out a Goal Digger experiment–keeping our food spending down (a relative “down” compared to you fantastic frugal food spenders). It’s really helpful to have one spending goal in mind. It’ll be interesting to hear if you can convert your friend Soapy. Sounds like you might need to help her tackle her addiction before she can master the budget.
    Laurie@ThreeYear recently posted…5 Proven Hacks to Overcome Anxiety

  • Nice analysis! I think that any of these methods would work great for anyone who is trying to budget.

    Truth be told. Mr. FAF and I don’t use any of the tools a I’ve. We have never had any itemized or written down budget. We just try to spend as little as we can and not buy things we don’t really need. It’s been working out great for us so far! 😀
    Ms. Frugal Asian Finance recently posted…10 Simple Things We Do To Save Money

  • We did the envelope system when we were getting out of debt. After becoming consumer debt free we are somewhere between the envelope and zero system.

    I like to track our percentages but there is almost no way to bring them into alignment and some of our line items like to change to the point that it won’t make sense.
    Budget On a Stick recently posted…If I Had A Million Dollars…

  • This is a great article. I’m sure not everyone knows there is more than one way to budget. I also love the quote about a budget being a reminder of what is important. It helps put budgeting into a positive light instead of thinking about it so negatively. Nicely done!

  • My mom lived by the envelope method (hidden between pots and pans in our cabinets) long before Dave Ramsey made it fashionable.

    If I were going to budget I’d do zero-based. We never actually budgeted because we a) got on the pay yourself first schedule by automating investments and b) paid all essential bills automatically from checking. Then we just spent what we had left over.

    We still track every penny, though.
    Mrs. Groovy recently posted…Building Groovy Ranch: Update 4

  • I like all of them for different reasons. 🙂 I’m a big fan of 50/30/20 if you must budget, but normally flip the 30/20 so that 30% is savings and 20% is spending on wants.

    The one thing I don’t like about it is that it’s not obvious that those are maximums for spending, and minimum for saving. Saying you SHOULD spend 50% of your income on Needs doesn’t really make sense if you can make it work with only spending 45% or 25%, you know? Gotta have that nuance in there, or you can convince yourself anything is a ‘need’ just to fill up that bucket.
    Dave @ Married with Money recently posted…The Snowflake That Broke The Camel’s Back: Becoming a Two Car Household

  • Wow, I’m boring. I just do a “$X for this category, $Y for this one, etc.” and then put the rest in savings. The numbers are based on what we generally spend (we have a lump sum for general spending each week), what we need to save for yearly stuff like car insurance (or quarterly stuff like taxes), what can afford to put into various goals (vacation, eventual car down payment, etc.) and then, as already stated, the rest gets thrown into savings.
    Abigail @ipickuppennies recently posted…How to dive into personal finance (without drowning)

  • I just went back to re-read your cast of characters and loved how you put that together. Budgets are so tricky in that many people either feel they are too restrictive, or they make up something like “oh my budget is in my head.” Uh, no it’s not. 🙂 Unless maybe you are a math prodigy. I use a simple spreadsheet. I tried to get more complicated with YNAB but I just couldn’t figure it out or stick to it. Budgets remind me of diet types. If you ask, “what is the best diet?” The answer is, “the one that works for you.”

    • Ha! Thats perfect Tonya, I absolutely agree. Spreadsheets works for us just fine too, everyone needs some sort of budget/organization is how I feel.

  • I guess I’m a combo of #2 and #3. Basically, I’ve figured how much I want to save first, then go backwards from there. But I also am not a natural spender, so I don’t really have issues going over budget. Instead of being tied to a budget, I’m just super picky about what I buy and think about it like, “Is this thing worth my money?” Most of the time, it’s no.
    The Luxe Strategist recently posted…22 Ways to Live Luxuriously on a Budget

    • That’s such a good way to think about spending. I didn’t realize that principle until I was 20? I use to go into a Claire’s at the mall and buy junk for $1 or $5 because it was cheap. And yes they’re cheap junk too!

  • When I was in debt paying back my student loans, I would use the percentage method and it helped out a lot. I was able to figure out if I needed to cut back on going out to eat or on my groceries in order to pay the monthly amount I wanted for my loans.
    Nowadays we don’t really have a budget since our expenses are low and we barely need to make any changes on our spendings.
    Kris recently posted…I Have An Emergency Fund But Where I Should Park It?

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