Five+ Different Ways to Budget and Beat Debt (There’s a Method for You)

It’s Not Rocket Science. All You Have to Do Is Get Started.

So you’re determined to beat debt and you want to start a budget. Problem is, you’ve been here before and you’ve gotten frustrated.

You did your best to track all your expenses, but something unexpected always bit you on the ass.

Or a huge, completely unanticipated expense came out of nowhere like a dinosaur-crushing asteroid and devastated any progress you thought you’d made.

From my March update — shit happens. And then keeps happening.

Or, you saved big in one category, felt good about a little dinner out or a trip to McDonald’s (don’t laugh, that just happened to me), and that $20 or $9 came back at the end of the month and bit you on the ass.

So close. So, so close.

I don’t blame you for thinking that making a budget will just lead to a lot of ass biting. I don’t blame you at all for setting it aside. Hell, I failed to budget properly for decades, darlings. De-cades.

But Here’s the Thing: We Were Doing It Wrong

I always hated budgeting, with the passion of a thousand suns. There was something so mean about it, so pinched and worrying. I felt like, at some point, I was better off just not knowing. Anytime I made a budget, I felt judged.

[Image: Judge Judy, giving my finances the stinkeye. via TMZ]

I fooled myself into thinking it was okay, because I tracked my net worth and I kept track of bills, and generally paid things in an orderly manner, even in my worst years, but that’s not budgeting. That’s just rearranging deck chairs.

Thing is, I was focused on the bottom line and not on the soul of budgeting.

The point of a budget is to motivate you, to spur you on, to get you in a little competition with yourself. A good budget shows you how to make changes so you can be empowered, start to save, and build toward a better future.

The Magic Kingdom of a Budget that Works

This time, you’re not gonna be beat by a little spreadsheet and some red ink. You’re gonna wrestle these numbers to the ground and get a good look at what they can do for you.


Walt Disney believes in you. [Image: GIF of Walt saying, “If You can dream it, you can do it”]

Wait: I know what you’re going to say.

“What if I make a budget and discover nothing’s left?”

Truth is, the first time, you probably will. That’s important input, too: a sign that you will need to find some way to earn more income.

Let’s look at five types of budgeting that can set you on the path toward understanding your spending — and changing it to saving. Pick the one that appeals to you.

Envelope Method

The envelope method, popularized by Dave Ramsey, is an age-old, cash-based method for budgeting by category. It works exactly like it sounds: You set up your budget, put money in an envelope for each category, and when it’s gone, it’s gone. No shifting money from one envelope to another, no cheating.

Nowadays, when most of us don’t really carry much cash, the usefulness of this method is limited, but it’s still a great way to control spending in targeted categories, like coffee shop purchases, liquor, or eating out. As soon as our spending is under control, for example, I plan to pull out $10 or $20 a month for some of the wonderful street musicians, homeless folks, and hardworking baristas of Dupont Circle in Washington, DC where I commute to work.

One of my friends swears by this method for her grocery shopping. So I think the takeaway is that this is an adaptable system that you don’t have to adopt whole cloth. For another, less complimentary view of envelope budgeting, check out this critical review from Dough Roller.

YNAB: “Give Every Dollar a Job”

You Need a Budget — which is both a software product and a method — has attained cult status, and rightly so. It’s a practical, realistic, forgiving system for people like you and me who often don’t have the cash flow we need. Unlike the envelope method, YNAB acknowledges that you will overspend sometimes with even the best planning, and permits you to shift funds from another category at times. ’Cause life happens.

I have never used the software or (yet) studied the method at length, but my current approach to budgeting owes a lot to the core idea of giving every dollar you earn a job, including savings. If you can assign your income to categories with relatively fine-grained detail, you really begin to see where you can economize — and also where you simply need to find new income.

Another strength of the YNAB approach is the idea of “aging your income” by getting to the point where you are actually spending last month’s earnings instead of this month’s, so you are a month ahead. I aspire to this stage; it will probably take me about a year to get there.


The 50/30/20 rule was coined by Elizabeth Warren, who now wants to be your president. I’ll say this about her: her approach to money is certainly sounder than that of the individual currently occupying the White House.

(That’s me using my inside voice.)

The method is this: 50 percent of your income should go to fixed expenses, 30 percent to desires and non-fixed expenses, and 20 percent to savings and debt reduction. Its chief appeal is simplicity: this is the budget for people who hate budgets. 50/30/20 is definitely an approach to either love with all the love or hate with all the hate. There don’t seem to be many neutral opinions about it. Try it if it appeals to you.

Spending Plan

A lot of people swear off budgets but swear by spending plans. Described variously, the main feature of a spending plan versus a budget is that it focuses on a future goal, and gears your spending choices to that goal.

Both Get Rich Slowly and Becoming Minimalist describe the spending plan as a way to focus not on the limitations of your money but on its possibilities. I like this idea and plan to investigate it further, though at the moment my most important priority is to face and grapple with my limitations, before I start dreaming too big.

The Anti-Budget

If you’ve read this far, you’re probably plenty pissed off that none of these seems right for you. Maybe you are one of those bold people who can pull off Paula Pant’s Anti-Budget (it’s not for the faint of heart). In a nutshell, instead of bean-counting your way through each month, you set aside a percentage of savings (what my mom always called Paying Yourself First), and then…nothing.

You heard me. Told you this was not an approach for weenies.

On her dynamite blog Afford Anything, Pant defines “savings” as anything that

  • reduces debt
  • builds investments
  • saves for a rainy day

That’s it. That’s all. It’s beautiful.

This won’t work for me, ever, because I have too many detailed expenses I have to hit each month, but if you have relatively few fixed obligations, go for it.

More Budget Goodness, If You Can Even Stand It

While researching this post, I stumbled on this great explainer piece from Atypical Finance, which covers some of these methods and a few others in more depth.

He spends some time analyzing which type of budget is suited to different situations, and pitfalls of each type.

One difficulty I have with a few of these methods (like the 60% solution) is their presumption that you are doing well enough to be able to cover your fixed expenses with just that much income. For those of us in serious, and maybe chronic, debt, or people recovering from big setbacks such as divorce or illness, this may not be too realistic.

How I’m Doing It Right Now

I’d say my current, idiosyncratic approach falls somewhere between YNAB and a spending plan. I basically just use an Excel spreadsheet to track every single category of expenditure, with a column for what I’ve budgeted and a column for what I actually spend. I have a line item for unexpected expenditures and additional income, since I am now working small gigs to extend our spending and saving power.

The big change I’ve made, which has been enormously helpful, is to track expenses by pay period instead of by month. I don’t fully understand how this has helped me get a better handle on our money than I ever had before, but the difference is enormous.

I use a deeply flawed Google spreadsheet of my own devising. It’s not fancy, but works for me. I use a lot of the white space to keep running notes to myself; for example, I write notes about each individual unexpected expense, which helps me forecast more effectively in subsequent months. My budget is very much a living thing, with 10% variances most months.

Start Where You Are

Whatever method you choose, the most important thing is to start. It’s quite possible that you’ll shift methods at some point when your goals and situation change. For me, mapping my expenses with a detailed overview was an enormous liberation, one that is already paying off.

So start somewhere, let yourself be imperfect, and refine your approach as you go. What’s stopping you? Don’t lose your nerve.

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I’m a 50-something bohemian with a mountain of debt and regrets. Can I dig out before it’s all over? I brake for poets.

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