Have More Budgeting Fails Than Successes? Try Budgeting by Paycheck

A mother budgets while her daughter plays next to her.
Getty Images

Zero-based budgeting. The 50/30/20 rule. The cash envelope method.

There’s no shortage of useful budgeting methods, but what works for one person may not work for the next. And the problem isn’t always a lack of commitment or effort.

Sometimes a particular budgeting method isn’t the right one for your financial situation.

That’s something Kumiko Love, an accredited financial counselor and founder of The Budget Mom, understands intimately.

“During my first couple years of budgeting, I tried so many methods — the calendar method, the paycheck method, percentage budgeting, the cash envelopes,” Love explained. “I tried Dave Ramsey’s baby steps. Every single time, I felt like I was failing because I wasn’t reaching my financial goals the way I thought I should be.”

Most Households Have a Budget But Struggle to Stick to It

A 2023 survey from Debt.com found 85% of U.S. households budget, up from just 69% in 2019.

But hidden in the positive news from this survey was a revealing fact: 50% of respondents said they were living paycheck to paycheck.

As Love discovered after her own failures, budgeting isn’t a one-size-fits-all approach. And for those who are struggling financially, it may help to combine key elements of several budgeting methods to finally find success.

Love combined elements of calendar budgeting, paycheck budgeting and the cash envelope system into what she calls the budget-by-paycheck method. It’s a custom approach that can work where other budgets have failed.

Don’t know where to begin with budgeting? Take our quiz and get custom recommendations on which budgeting method to try and what to skip.

How the Budget-by-Paycheck Method Works

There are five basic steps to budgeting by paycheck using this method.

  1. Track your expenses
  2. Create a calendar
  3. Write a budget for each paycheck
  4. Pay attention to your budget categories
  5. Use the cash envelope system

1. Track Your Expenses

Before you can plan out how you’ll spend your money, you need to be aware of where it’s going, Love advises. So first, track your spending.

Take a month or two writing down every time you spend money so you have a better idea of where your dollars go. Alternatively, you can use bank statements, credit card bills and old receipts to retroactively take inventory of your spending habits.

If you’re spending too much, you have two choices: cut expenses or make more money.

Pro Tip

Don’t love writing stuff down? There’s an app for that. See which free budgeting apps we recommend for tracking expenses, managing debt and more.

A detail of a planner with a budget
Kumiko Love advises people to track their spending as a first step to organizing their finances. Courtesy of Kumiko Love

2. Create a Calendar

Once you’re aware of how you spend money, it’s time to put together a plan for your money. Use a monthly budget calendar to write down bill due dates, scheduled events, doctor’s appointments, holidays, birthdays and other variable expenses.

“People think budgeting is just really paying your bills, making extra debt payments and saving, but … it’s those life events that set us back on our journeys, because we’re not prepared financially to pay for them,” Love says.

While you can’t schedule unexpected expenses, you can allow for some wiggle room when you move into the next step: creating a paycheck budget.

3. Budget by Paycheck

After you fill out your calendar, create a budget for each paycheck.

If you get paid twice a month, you’ll have one zero-based budget to cover expenses early in the month and another budget dedicated to end-of-the-month expenses.

You’re not budgeting your full monthly income like with other methods but just that paycheck and expenses during that time span.

4. Pay Attention to Your Budget Categories

The paycheck budgeting method doesn’t dictate how much you should spend in each category or goal.

It’s completely up to you to decide where your money needs to go, whether that’s living expenses or irregular expenses like travel and dining out.

That’s why it’s important to define financial priorities like paying off debt, creating an emergency fund or putting money toward seasonal sinking funds each pay period.

Pro Tip

Looking to pay off debt fast so you can get back on budget? Try the debt snowball method.

An example of what the udget by paycheck method looks like.
Photo courtesy of Kumiko Love

5. Use the Cash Envelope System

Once you’ve got your budget laid out, put cash into envelopes to pay for variable expenses.

Love recommends scheduling bill payments online to avoid the hassle of trying to pay them via the cash envelope system.

While Love’s money management system is manual, yours doesn’t have to be. You can use a budget planner, take advantage of Love’s free resources for organizing your finances or use a budgeting app or spreadsheet.

Looking for a good budgeting app? We’ve got you covered with the five best budgeting apps to get your finances together.

3 Tips for Success With the Paycheck Budgeting Method

Love — who paid off five-figure debt using this custom budgeting method — has three main pieces of advice for others looking to budget by paycheck.

1. Be Realistic With Spending Limits

It’s easy to ambitiously commit to no additional spending beyond your monthly bills and groceries, but that’s not realistic. Tracking your expenses closely for several months will help you pick a more achievable goal and spending limit.

“When I first started budgeting, I set my food budget at $300 a month when I was realistically spending $700,” Love says. “I set myself up to fail before I even began, because I drastically reduced a category in my budget that I wasn’t prepared for.”

2. Make Time for an End-of-Month Budget Review

Reviewing where your money actually went compared to what you budgeted is crucial.

The process can help you flag critical mistakes you’re making and identify changes that would help you reach your financial goals. The problem areas you identify one month can become next month’s priority.

Pro Tip

Need to get more mindful? Try kakeibo, the Japanese budgeting method that encourages slowing it down with an old-school pen-and-paper approach.

3. Take a Holistic Approach to Budgeting

Budgeting isn’t just a money management tool. Sometimes it can go beyond personal finance and force us to face some difficult truths that encourage personal growth in surprising ways.

“I think a lot of people don’t realize that about their budgeting journey, just how much you’ll discover about who you really are and the things that really trigger you to spend money,” Love says. “(Budgeting is) a lifestyle, it’s a mindset change, and it’s a journey of self-discovery.”

Find a Budgeting Method That Works for You

The good news for those with more budgeting fails than wins is you’ve already learned what doesn’t work for you. So take those experiences and put them to work determining what budgeting methods to try next on your journey to a better, more stable financial future.

Want to learn about other budgeting approaches? Check out nine of the most popular budgeting methods you can mix and match to create your own financial management style.

Kaz Weida is a staff writer for The Penny Hoarder. Former senior writer Nicole Dow contributed.