Rachel Cruze: 3 Budgeting Techniques That Will Unfortunately Never Work

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Budgeting can be overwhelming, cumbersome and sometimes confusing. With the avalanche of tips and strategies online and on social media, it’s easy to get frustrated with methods that don’t really work for you. And as money expert Rachel Cruze said recently in a Ramsey Solutions video, when it comes to budgeting, “there are almost too many budgeting strategies out there these days, and having too many options actually can create less action.”

Here are three strategies she deems unhelpful, and one she strongly recommends.

1. The 50/30/20 Rule

The strategy calls for you to break your paycheck into different portions, which go to different buckets: 50% of your budget is allocated to needs, 30% to wants and 20% goes to savings.

Cruze said she has two issues with this strategy. First, it doesn’t leave any room for paying off debt. In turn, she said, you will have to figure out what percentages to change in order to pay off debt.

“And that is one thing that I want you all to do very early on in your money journey, is be paying off all of your debt, including your student loans, consumer debt, all of it,” she said.

 The second issue is that this method does not help you grow or move you toward the wealth-building process.

2. The 60% Solution

Cruze called this method “confusing.” 

“So, with this you’re supposed to combine your wants and your needs and spend 60% of your paycheck on those, and that leaves you 10% for retirement, 10% for long-term savings, 10% for short-term savings and 10% for fun,” she said.

According to Cruze, this leaves a lot of margin for error because there are some blurry lines between your needs versus your wants.

3. The Reverse Budget

This strategy entails setting aside money for savings and investing, and then covering your essential expenses, debt and nonessential expenses.

“I appreciate the savings up front, but again, the idea of leaving debt payoff to the other parts of your budget, even after you have money saved, I don’t necessarily agree with,” she added.

A Better Alternative — The Zero-Based Budget

This strategy — also called the “every dollar budget” by Dave Ramsey — is the one she supports, as really is simple.

“This method teaches you to subtract all of your expenses from your total monthly income, where the outcome is zero,” she said.

In other words, it means you are intentional with every dollar and where it’s going.

“Once you get into this routine and you master it, you have so much control over your money,” she said.

Cruze uses the Ramsey EveryDollar app to manage her zero-based budget. In a blog post on the Ramsey Solutions website, she recommended that before diving in, “open up your online bank account or grab your bank statements. That will give you the info you need as you start filling out numbers.”

And as George Kamel said in another Ramsey Solutions article on this method: “Got money left over? First, throw some confetti and do a celebration dance. (Or if you’re like me and can’t dance to save your life, a hearty fist pump will do.) Then, put that money to work!”

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