Which Budget rule is the best?

One of the most significant angles of our daily lives is financial management. It is very important to create a budget for our expenses and ensure that we have sufficient savings to shield our emergencies or future expenses.

What is meant by the Budget rule?

A budget rule is a prescribed approach or principle that assists individuals or households in handling their finances by offering a framework for dividing their income and expenses. It is a collection of principles that establish the foundation for a financial strategy, empowering people to make informed choices regarding their money. Although budget rules can differ in their intricacy and particular demands, they all aim to support individuals and families in effectively managing their finances and attaining their financial objectives.

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There are several budget rules that people commonly use, such as the 50/30/20 rule, which suggests that 50% of one’s income should be spent on essential expenses, 30% on discretionary expenses, and 20% on savings and debt repayment. Another popular budget rule is the envelope method, where one separates cash into envelopes labeled for various expenses. By implementing a budget rule, individuals and households can manage their finances effectively, prioritize their spending, and make strides toward their financial objectives.

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Choosing a budgeting method that aligns with your lifestyle and financial objectives can be a daunting task due to the variety of options available. This article aims to assist you in selecting the most appropriate budgeting rule or method by examining the most commonly used ones. Regardless of whether you are striving to save for a significant purchase or repay debts, there is a budgeting guideline that can aid you in achieving your financial goals.

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Let’s delve into the different budget rules and determine which one is most suitable for you.

The 50/30/20 Rule

The 50/30/20 rule is a simple and straightforward budgeting rule that recommends allocating 50% of income towards necessities, 30% towards wants, and 20% towards savings and debt payments. The rule provides a clear and easy-to-follow framework for managing expenses, and it can be a great starting point for those who are new to budgeting.


  • Simplicity: The 50/30/20 Rule is easy to understand and follow, making it a great option for those who are new to budgeting.
  • Flexibility: This rule is flexible enough to accommodate various income levels and financial situations.
  • Prioritizes savings: By allocating 20% of your income towards savings and debt repayment, you can build an emergency fund, pay off debts, and work towards your long-term financial goals.
  • Encourages mindful spending: The 30% allotted for wants forces you to prioritize and think carefully about the things you truly value and want to spend money on.


  • May not work for everyone: While this rule can be effective for many people, it may not be the best fit for those with very low or very high incomes.
  • Oversimplification: Dividing your expenses into only three categories may not provide enough detail to effectively manage your finances.
  • No customization: This rule may not take into account the specific needs or goals of an individual or household.
  • Lack of prioritization: The rule doesn’t prioritize one’s most important needs or expenses, such as housing or healthcare.

The Zero-Based Budget

The Zero-Based Budget is a meticulous and hands-on budgeting approach that involves allocating every dollar earned to a specific expense or savings category, leaving no money left over at the end of the month. This method can be useful for people who want to monitor their spending in more detail and ensure they make the most of every dollar they earn.

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  • Every dollar is accounted for: Zero-Based Budgeting ensures that every dollar earned is allocated to a specific expense or savings goal, which minimizes wasteful spending and promotes better financial decision-making.
  • Prioritizes spending: This method allows individuals to prioritize their spending based on their values and financial goals, which helps them remain focused and avoid overspending in areas that do not align with their priorities.
  • Reduces debt: By allocating a specific amount towards debt repayment every month, the Zero-Based Budget can help individuals pay off their debts and reduce their overall debt load.


  • Time-consuming: The Zero-Based Budget requires careful planning and tracking of all expenses, which can be time-consuming and tedious.
  • Inflexibility: This method may not provide enough flexibility for unexpected expenses or changes in financial circumstances.
  • Discipline is required: Following the Zero-Based Budget requires discipline and self-control to adhere to the budget and avoid overspending.

The Envelope Method

The envelope method is a cash-based budgeting approach that involves physically separating cash into different envelopes labeled for different expenses, such as groceries, rent, utilities, and entertainment. By using cash and physically separating it into different categories, it can be easier to stay on track and avoid overspending.


  • Encourages disciplined spending: The Envelope Method ensures that you stick to your budget and spend only what you have allocated in each envelope, helping you avoid overspending and saving money.
  • Easy to track: It is easy to track your spending because you can see how much money is in each envelope, and when it’s empty, you know you can’t spend any more money in that category until the next budget cycle.
  • Helps you prioritize your expenses: With the Envelope Method, you can prioritize your expenses by allocating more money to essential categories such as groceries, rent, and utilities, and less to discretionary expenses like entertainment and dining out.


  • Not suitable for everyone: The Envelope Method may not be suitable for everyone as it requires discipline and commitment to make it work. Some people find it difficult to stick to their budget and end up overspending.
  • Inconvenient for online purchases: The Envelope Method may not be convenient for online purchases as it requires cash transactions. You may need to withdraw cash for each envelope, which could be time-consuming and inconvenient.
  • Risk of losing or theft: Keeping cash in envelopes may expose you to the risk of theft or loss. If you lose an envelope, you lose all the cash inside it.

The Pay Yourself First Rule

The pay yourself first rule is a budgeting approach that prioritizes savings by allocating a percentage of income towards savings and investments before any other expenses are paid. This approach can be a great way to build up savings and work towards long-term financial goals.


  • Encourages saving: By prioritizing saving, this rule helps you establish a habit of putting money away for your future financial goals.
  • Reduces the temptation to overspend: By automatically setting aside a portion of your income, you may be less tempted to spend it on unnecessary expenses.
  • Provides financial security: By building up savings, you can have a cushion to fall back on in case of unexpected expenses or emergencies.


  • May require lifestyle adjustments: If you’re not used to saving, allocating a portion of your income to savings first may require adjusting your lifestyle and budget.
  • Can be difficult to implement: If you’re living paycheck to paycheck, it may be difficult to allocate a portion of your income to savings without making major changes to your budget or lifestyle.
  • May not work for everyone: The Pay Yourself First rule may not be suitable for individuals with high levels of debt, as it may be more important for them to prioritize paying down their debts before focusing on saving.

The 80/20 Rule

The 80/20 rule is a budgeting approach that recommends allocating 80% of income towards necessities and 20% towards discretionary spending and savings. While it can be a great option for those who want to prioritize their basic needs while still having some flexibility for non-essential expenses, there are some advantages and disadvantages to consider.


  • Simplicity: The 80/20 rule is easy to understand and follow, and can help you prioritize your expenses while reducing unnecessary spending.
  • Can help you save money: By focusing on the most important expenses and minimizing the others, the 80/20 rule can help you save money and reach your financial goals faster.
  • Encourages mindful spending: The 80/20 rule promotes mindfulness towards your spending and encourages you to consider the impact of your expenses on your overall financial health.


  • May not be suitable for everyone: The 80/20 rule may not work for everyone, particularly those with limited income or high levels of debt.
  • May overlook important expenses: Focusing only on the most important expenses may cause you to overlook important expenses that do not fall within the 20% category.
  • Can be inflexible: The 80/20 rule may not be flexible enough to accommodate unexpected expenses or changes in your financial situation.

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Which budget rule is best for someone who has a low income?

If you have a low income, you might want to consider using the Zero-Based Budget or The Envelope Method. The Zero-Based Budget is helpful for keeping track of expenses and deciding which ones are most important. The Envelope Method is great for allocating money to specific categories and physically separating cash to avoid overspending.

Is it necessary to follow a specific budget rule, or can I make my own budget plan?

It’s not necessary to adhere to a particular budgeting rule. You can develop your own budget plan according to your financial goals and priorities. The key is to be consistent with your budgeting and frequently assess your plan to ensure it continues to satisfy your requirements.

How long does it take to see the benefits of a budgeting method?

The length of time required to see significant benefits from a budgeting method depends on the individual’s financial situation and the specific method used. Generally, it takes a few months of consistency to notice a positive impact on finances. It’s important to stick to the budgeting plan over an extended period of time to fully reap the benefits of the effort put into it.

Can I change my budgeting method if it’s not working for me?

Certainly, you have the option to switch to a different budgeting method if the current one isn’t working for you. It’s crucial to remain adaptable and discover a budgeting approach that fits your lifestyle and financial objectives. Trying out various methods can aid you in finding the ideal one.

Do I need to hire a financial advisor to help me choose the best budgeting method for me?

You don’t need to hire a financial advisor to select the most suitable budgeting method for you. You can access various resources online and in books that can provide you with information about different budgeting methods and help you choose the one that aligns with your lifestyle and financial objectives.


There is no one-size-fits-all answer to the question of which budgeting rule is the best. Different budgeting rules offer unique benefits and drawbacks, and the best one for you depends on your financial situation, goals, and personal preferences. Some popular budgeting methods include the 50/30/20 rule, the zero-based budget, and the envelope method, among others. It’s important to experiment with different methods and find one that works best for your lifestyle and financial goals.

Regardless of the method you choose, consistency and regular monitoring are essential for success. By tracking your spending, staying within your budget, and making adjustments as needed, you can take control of your finances and work towards achieving your long-term financial goals.

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Author: Vedanti KiranVedanti is a female finance writer, currently pursuing her studies at Hansraj College. She has a passion for writing and travelling, and her articles on the stock market, finance, investment, and cryptocurrency are well-researched and informative. With her unique perspective on the world of finance, Vedanti is a go-to source for those seeking insights into the world of finance.

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