Financial Planners Share Their Personal Favorite Budgeting Methods
Written by
Cindy Lamothe
Edited by
Joe Evans
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Budgeting isn’t exactly easy, but certain methods work better for you than others. There are many approaches to choose from, and every financial planner has their personal favorites for budgeting.
For example, Chris Urban, CFP and founder at Discovery Wealth Planning, says his preferred budgeting method is to set up automatic transfers to various investment/retirement/savings accounts directly from your paycheck or a separate bank account.
“Have an additional, separate bank account used for fixed and discretionary living expenses,” he explained. “Have only whatever is left transferred to this bank account so that you never even see any of the other dollars that are being saved and invested. If you don’t have the money in your spending account then you won’t be able to spend it!”
Below, more financial experts offer their favorite approaches to budgeting.
Zero-Based Budgeting
“Zero-based budgeting is my top choice,” said Rhett Stubbendeck, CEO and founder of Leverage Planning. “It means giving every dollar a job until you’re left with zero at the end of the month. This method ensures no money is wasted. I use this approach for my finances. When I started [my company], I needed to track every expense carefully. Zero-based budgeting helped me allocate funds effectively and avoid overspending.”
“We recommend this method to clients who want strict control over their finances,” Stubbendeck said. “It’s great for those with irregular incomes since it forces careful planning.”
Gloria Garcia Cisneros, certified financial planner and Latina wealth manager at LourdMurray, believes in zero-based budgeting with mindful spending.
“This method takes up a bit more work upfront because you essentially have to know all your expenses and work backward from your income to see the deficit or surplus,” she advised. “I would track your monthly expenses and write all the numbers and due dates.”
“You may realize throughout his process you have expenses that aren’t necessary or that you had forgotten about (like subscriptions). Once you hone in on your ongoing expenses and do some of the cleaning, then you can add it all up. I tend to separate Essential from Fun Expenses and have two totals.” Garcia Cisneros said. “You can then subtract this from your net income. If there’s money left you can allocate it to savings or investing.”
“The goal of the zero-based method is that at the end you end up net 0. Essentially you’ve given every dollar you make a job. As I said it takes work upfront, but once you go through it once and review high-level consistently then it’s easy to edit or make changes as life changes.” she added.
“I always tell people to have a monthly or quarterly money date with themselves and their money to check in and adjust their budget if needed,” Cisneros explained. “It’s not a restrictive or permanent tool, it should make you feel informed, and empowered and can change with you as life changes.”
50/30/20 Budgeting Rule
“The 50/30/20 rule is another favorite,” said Stubbendeck.”It divides income into 50% for needs, 30% for wants, and 20% for savings and debt repayment.”
It’s simple and easy to follow,” he explained. “I like this method because it balances saving and spending. I’ve used the 50/30/20 rule to ensure I’m saving enough while still enjoying activities like dining out. It’s a great way to maintain financial health without feeling too restricted.”
“At [my company], we suggest this method for clients who want a straightforward approach to budgeting. It’s flexible and encourages good saving habits.” Studdendeck said.
Pay-Yourself-First Budget
“It’s a simple budgeting method that puts savings and debt payback first,” said Ethan Keller, president of Dominion. “With this method, a person can set aside a specific amount of each salary for savings and debt repayment, keeping the remaining amount for personal use. Pay-yourself-first budgeting is a good option for those who need help saving money each month or prefer not to monitor their monthly spending.”
Melissa Murphy Pavone, certified financial planner and director of investments at Oppenheimer & Co. Inc., also advocates for this approach.
“With the income coming in and the expenses going out–pay yourself first. The results of compound interest are powerful,” she explained. “As your income increases, lifestyle inflation creeps in. Avoid the urge to spend more as you make more. As you get a raise, give yourself a raise. Increase your 401k contribution. Add to your emergency fund. Save more. Invest the difference. Your future self will thank you.”
She also suggests working with a professional.
“Take a deep dive with your certified professional planner in order to provide personalized guidance and help navigate all of life’s important decisions including cash flow. Consulting with your certified professional planner can provide personalized guidance and help you navigate these important financial decisions.”
Priority-Based Budget
According to Keller, it helps to assign financial resources based on the ranking of expenses by importance.
“This approach adjusts budgets in response to shifting objectives and economic conditions.”
He says this approach is interesting because it allows one to prioritize spending on the most important things to one or their family.
“Still, for it to work, discipline and clear financial goals are necessary,” he noted. “Also, the subjective process of setting priorities may result in uneven budgeting procedures or disregarding long-term objectives in favor of short-term wants.”
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