Budgeting is frequently associated with downbeat words such as boring, tedious, and restrictive. Forget the negative connotations. Budgeting is a powerful tool used by people to gain control of their money. Planning inspires people to live sensibly, spend wisely, and build savings. Whether you are saving for a short-term goal, like a family holiday or paying off a credit card, or a long-term goal, such as accumulating money for retirement, a proper plan can provide rich financial rewards and dramatically raise your credit score. Here are the highs and lows of four popular household budget plans:
| Type of Budget Plan | How it works | High point | Low point |
| Static or Fixed budget | Identify income and fixed and variable expenses, including one-time expenses. Everything is analyzed and broken down into set monthly payments to include savings. | This budget provides a clear sense of expenses. It helps people stay on track regarding routine bill paying and savings. This 12-month budget is reevaluated each year. | Expenses must be regular for this plan to work effectively. One must also create a buffer for sudden or unplanned expenses due to less spending flexibility. |
| Flexible
(50/20/30 plan) |
Create four basic categories – necessary fixed bills, necessary flexible expenses, non-essential expenses, and savings. Half goes to necessities, 20% to savings, and 30% to everything else. | This annual budget is adjusted based on how spending shifts over the course of the year. Thus, it offers spending flexibility. Savings is set at 20%. | 30% is allocated towards lifestyle. If money is tight, people tend to lower their percentage of savings which can be detrimental. Also requires more attention than a fixed budget. |
| Rolling or Continuous | This budget changes continuously. While the budget is a 12-month plan, it gets rolled forward after each month. | This plan is designed for those who seek to be aggressive and innovative in budgeting or for those lacking fixed expenses. | Much more work than traditional as it needs constant updating. |
| Zero-based | You begin with an income side of the equation and money is allotted to each line-by-line category until you are down to zero. | It reduces doubt and indecision as every dollar is accounted for each month of the year. | Requires you to make a new budget every month as nothing carries over. |
