Beginners Guide to Budgeting Methods

Estimated Reading Time: 5 minutes

Written by Amie Fenech



Budgeting is a crucial tool for managing your family’s finances, paying off debt, and achieving your financial goals. I am relatively new to all things personal finance and budgeting and when I started out I found all the different methods each person swore by very confusing.  The world of finance and budgeting can be really intimidating. If you’re starting out with lots of debt or are worried about your finances it can be enough to bury your head firmly back in the sand. I have picked up information as I’ve progressed on my journey and started putting together this beginners guide to budgeting methods. The truth is, no one starts out as an expert.


As a beginner, it’s essential to understand different budgeting methods to find the one that best suits. In this beginners guide to budgeting methods, we will explore three effective budgeting methods: cash or envelope budgeting, zero-based budgeting, and the pay yourself first method. Let’s dive in!



1. Cash or Envelope Budgeting:


Cash or envelope budgeting method is a straightforward method that helps you control your spending by using physical cash and designated envelopes for different expense categories. Here’s how it works:

  • Step 1: Determine your budget categories: Start by identifying your main spending categories such as groceries, utilities, entertainment, and debt repayment.
  • Step 2: Allocate cash to each category: Assign a specific amount of cash to each category based on your budget. For example, if your food shopping budget is £250 per month, put £250 in an envelope labeled “Groceries.”
  • Step 3: Spend within the allocated cash: Throughout the month, spend money only from the designated envelopes. Once an envelope is empty, you know you’ve reached the limit for that category.

Cash or envelope budgeting provides a tangible way to track your expenses and promotes conscious spending. It helps you avoid overspending and encourages a stronger connection with your finances. The main negative of this in a post covid world is that many places no longer accept cash. But will certain help you stop any impulsive spending.


2. Zero-Based Budgeting


Zero-based budgeting is a method where you allocate every pound of your income to a specific purpose, ensuring your income minus expenses equals zero. Here’s how you can implement zero-based budgeting:

  • Step 1: Calculate your total income: Determine your monthly income from all sources.
  • Step 2: Identify fixed and variable expenses: Differentiate between fixed expenses (rent/mortgage, utilities) and variable expenses (groceries, entertainment).
  • Step 3: Allocate income to expenses: Start by covering your fixed expenses. Then assign funds to your variable expenses, savings, and debt repayment until your income equals zero.
  • Step 4: Track your expenses: Regularly monitor your spending and adjust your budget as needed. Use budgeting apps or spreadsheets to simplify the process and keep you honest!

Zero-based budgeting ensures that every pound you earn has a purpose.  This helps you prioritise savings and debt repayment while providing a clear overview of your financial situation.


piggy bank

3. Pay Yourself First


The pay yourself first method emphasises saving money as a priority. It involves setting aside a portion of your income for savings before allocating funds to other expenses. Here’s how you can implement this method:

  • Step 1: Determine your savings goal: Define a specific amount or percentage of your income that you want to save each month.
  • Step 2: Automate your savings: Set up an automatic transfer from your checking account to a dedicated savings account on each payday. App based banks like Monzo are great for this.
  • Step 3: Budget with the remaining income: After saving, allocate the rest of your income to cover your expenses and debt payments.

By prioritising savings, the pay yourself first method ensures that you consistently set aside money for the future and build a financial cushion.




Budgeting is a powerful tool that helps families take control of their finances and work towards their financial goals. Whether you choose cash or envelope budgeting, zero-based budgeting, or the pay yourself first method, each approach offers unique benefits. Cash or envelope budgeting provides a tangible way to track expenses and avoid overspending. Zero-based budgeting ensures that every pound has a purpose and helps prioritise savings and debt repayment. The pay yourself first method emphasises saving as a priority.

As a beginner, it’s important to experiment with different budgeting methods to find the one that aligns with your financial goals and lifestyle. Remember, budgeting is a dynamic process, and you may need to make adjustments along the way as your circumstances change. The best budgeting method is the one that you can consistently stick to.


Budgeting Tips


Here are some additional tips to enhance your budgeting experience:

  1. Track your expenses: Keep a record of your spending to identify patterns and areas where you can cut back or make adjustments.
  2. Involve the whole family: Budgeting is a team effort. Involve your spouse and children in discussions about financial goals and encourage everyone to contribute ideas for saving money.
  3. Set realistic goals: Start with small, achievable goals and gradually increase them as you become more comfortable with budgeting. Celebrate your milestones to stay motivated.
  4. Seek support and resources: Join online communities or forums where you can learn from others who have mastered budgeting. There are also numerous budgeting apps and tools available to simplify the process. I have written a post all about strategies to stretch your budget which may be use.

Remember, the key to successful budgeting is consistency and discipline. Stay committed to your financial goals, adapt your budget as needed, and celebrate your progress along the way.

By implementing effective budgeting methods and making conscious financial decisions, you can create a solid foundation for your family’s financial well-being.

Start your budgeting journey today and take control of your financial future. Happy budgeting!