Let’s dive into method number 1: The envelope method. This method is great for people who don’t like tracking every single expense in their budget and want to start putting some money aside—because it gives you a great idea of where your money is going.

Here's how it works: The first thing you need is envelopes. Then, you label each envelope with the categories of your expenses, like housing or groceries. For each category, put the amount of cash you expect to spend for that month into the envelope.

You can also create an envelope for savings, so you can build your emergency fund or save for your next vacation. At the end of the month, open the envelopes and see if you were able to live within your plan. Then, for the next month, you can adjust the amount of cash in each envelope, based on what you learned.

Let’s move on to number 2: Pay yourself first. The pay yourself first method works best for people who do not like tracking every dollar in their budget and those who want to increase how much money they are saving.

This is how it works: Once you receive your paycheck, before you pay any bills, you pay yourself first. You set aside the amount of money you want to save and you send it to a separate account. This could be a traditional savings account, a money market account, an investment account, or it could even be paying down debt. It’s anything that helps you achieve your goals.

Then, make sure you have enough money in your checking account to pay your bills. And finally, whatever’s left after paying yourself and paying your bills is yours to use however you like. People also call it reverse budgeting because it doesn’t even feel like budgeting! It’s very quick and very hands off.

So, let’s talk about number 3: The 50/30/20 method. If you like tracking your expenses and also following a guideline on how much to save and how much to spend on needs and wants, then the 50/30/20 approach might be the one for you.

Here’s how it works: Budget 50% of your take-home pay for your needs, 30% for your wants, and 20% for your savings. That’s why it’s the 50/30/20 method. But, if these percentages don’t feel right, go ahead and choose percentages that work for you. Want to save more than 20%? Go for it! If you cannot save 20%, that’s OK too.

And remember—savings also includes money set aside for paying down debt. What's great about this method is that it helps you make progress toward your goals with your savings, but also makes sure you are enjoying your journey with your wants. 

Finally, the zero-based budgeting method. This fourth and final method is great for those who love details and like to see where every single penny goes.

Here’s how it works: Every month you start your budget from zero dollars. For every dollar that you spend, you have to justify the expenditure to yourself. As you give each dollar a job, whether it is housing, entertainment, dining out, the focus is to reduce or even get rid of the things that don’t align with your goals.

And if you cut something from your budget, you can save more as a result. Then, over the course of the month, track how well you did. When the next month starts, you start from zero all over again.

And now, let’s talk about the budgeting strategy that has worked for me for the past 10 years. I have been paying myself first! And the reason is quite simple—it doesn’t feel like I’m budgeting. I receive my paycheck. I put my savings aside, I pay my bills, then I feel fine spending money afterwards because I took care of my goals first.

But that’s not to say I haven’t used other methods in my life. What’s important to understand is that what works for you today may be very different from what works for you tomorrow, and that’s OK.

The bottom line is you just need to find the budget strategy that works for you. And remember—it’s better to make progress than aim for perfection. The longer you budget, chances are you will get better at it, improving your chances of reaching your money goals.

At Vanguard, no matter where you are in your financial journey, we are here to help you find your next best financial actions.

Vanguard can help you achieve your financial goals.

Log in to your retirement plan account at vanguard.com/FinancialWellness.