(This article originally appeared in the May 2024 issue of Military Officer, a magazine available to all MOAA Premium and Life members. Learn more about the magazine here; learn more about joining MOAA here.)

There are many reasons why creating — and maintaining — a spending plan, or budget, can be a good thing. First, it puts you in control of your finances and ensures you spend only what you can afford. It also can give you insight into your spending habits and an opportunity to change them.

But the most compelling reason to create a budget is to reduce financial stress and give peace of mind.

It’s important to find a budgeting style that works for you. Here are five different ways to create a road map for your money.

Loud Budgeting

This new trend encourages consumers to be open about their financial goals, mostly through social media, and tries to remove the stigma around talking about money. Those who follow this style of budgeting might let friends know, “I’m not going out for drinks tonight because I’m trying to pay down my credit card debt.”

Best for: Those who want to be more honest about money and spending. It can be combined with other types of budgeting.

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50/30/20 Budget

This type of spending plan splits your income into three main categories: 50% goes to necessities such as housing, utilities, transportation, groceries, and health care. Then 30% is earmarked for “wants” like dining out, vacations, and entertainment. Finally, 20% is set aside for savings and debt payments.

Best for: Those who don’t have a lot of debt.

Zero-Based Budgeting

The premise of this type of budgeting is that every cent should be justified before it’s spent. So monthly income minus all expenses should leave you with zero dollars.

Best for: Meticulous planners and those who like to be very deliberate in their spending.

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Envelope Method

What’s old is new again — this tried-and-true method has been around for years but has seen a recent resurgence on social media as “cash stuffing.” Each month, you set aside a specific amount of money into envelopes representing different budget categories. Once you’ve spent all the money
in the envelope envelope for a particular category, that’s it until the next month.

Best for: Those who need a rigid framework to stop them from overspending but don’t want to track every cent.

Pay Yourself First

This is sometimes called “reverse budgeting.” Instead of building your spending plan around expenses, you prioritize savings goals such as retirement, an emergency fund, or a house down payment, ideally automating contributions to those accounts. Then you use the remaining income for expenses such as housing, utilities, food, and debt payments. If there’s anything left over, you’re free to spend it.

Best for: Those who don’t like having to closely monitor their spending and want to save more.

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The key is to find a type of plan that works with your spending habits and your lifestyle. That will make it a lot easier to stick with, and consistency can create inner peace and financial well-being.