Which Budgeting Style Works Best for You?

The start of a new year often inspires people to get more organized with their money and track spending. Budgeting is one of the most powerful tools that can help you feel confident and gain control over your finances. But there isn’t just one way to budget. Two of the most popular (and effective) methods are Zero-Based Budgeting and the 50/30/20 Method.

Both help you manage your money, but they work in very different ways. Let’s break down how they work and which might be best for you.

What is Zero-Based Budgeting?

Zero-based budgeting means every dollar has a purpose. 

You start with your total monthly income and assign every single dollar to a category. Bills, savings, debt payments, spending money, investments, etc. until you reach $0 left “unassigned.”

Here’s an example:

If you bring in $3,500 a month, your plan might look like:

• $1,300 – housing
• $500 – groceries
• $300 – utilities
• $400 – debt payments
• $400 – savings 
• $300 – transportation
• $200 – fun spending/dining out
• $100 – emergencies/miscellaneous

Every dollar is accounted for.

Benefits:

• Very intentional
• Helps reduce wasteful spending
• Keeps you deeply aware of your money habits

Challenges:

• Requires regular tracking
• Can feel rigid if you prefer flexibility

This method is best for people who want structure and control, someone who is working toward very specific goals (paying off debt, saving aggressively), or anyone who likes to track details closely.

What is the 50/30/20 Budgeting Method?

The 50/30/20 method is simple and more flexible. It divides your after-tax income into three broad categories:

• 50% Needs – housing, groceries, utilities, insurance, transportation, essential bills
• 30% Wants – dining out, entertainment, travel, hobbies, shopping
• 20% Savings & Debt Repayment – emergency fund, retirement, extra debt payments, investments

Instead of tracking every category in detail, you just make sure your spending fits generally within these percentages.

Here’s an example:

If your monthly after-tax income is $4,000

• $2,000 - Needs
• $1,200 - Wants
• $800 - Savings and debt reduction

Benefits

• Easy to follow
• Encourages a healthy balance of saving and living
• Adaptable to lifestyle changes

Challenges

• May not work in a high cost of living area unless adjusted
• Less detailed insights into spending habits
• Easy to overspend on “wants” without monitoring

This method is best for people who a new to budgeting, busy families or professionals, people who want structure without having to keep track of every dollar.

Which Budgeting Method Should You Choose?

There’s no “right” answer, just what works best for you and your lifestyle.

Choose Zero-Based Budgeting if you:

• Want to be very intentional with your spending
• Are working hard to pay off debt
• Like structure and clarity
• Want to maximize every dollar

Choose 50/30/20 if you:

• Prefer simplicity
• Want guidelines instead of strict rules
• Are just getting started with budgeting
• Have fairly predictable monthly expenses

You can even combine both! For example, using 50/30/20 as your big picture guide, then using zero-based budgeting to plan your “needs” more closely.

Budgeting Builds Confidence

No matter which method you choose, budgeting isn’t about restriction, it’s about freedom. It helps reduce stress, keeps you prepared for surprises, and allows you to make progress toward goals that matter most to you.

Sunmark Is Here to Support You

Whether you want help creating a budget, building savings, or managing debt, we’re here to help. Explore our digital tools, financial education resources, and savings options to make this your best financial year yet.