Over the past long weekend, one of the chores on my list was to look at our family budget. It has not been revised in a while, and unfortunately, some of the numbers are no longer realistic due to inflation.

The allocation previously made towards electricity needs to be increased, along with the biweekly grocery amount. It is safe to say there was no constant; the squeeze was felt in almost all categories.

Over the years, I have tried to practise what I preach. Normally, when I have received a cost-of-living adjustment, I have paid into my savings or increased my pension contribution, rather than allocating more to expenses. But as the cost of living continues to rise, the squeeze is very tight, and I realise I need to make some concessions.

If you listen to Dave Ramsey podcasts, you know he is a firm believer in zero-based budgeting, which is different from the traditional budgeting approach I use. He suggests the concept is quite simple and represents a fundamental shift away from traditional budgeting methods.

Therefore, I thought I would research the differences between each approach in an effort to help readers decide which method will serve them best.

Traditional budgeting involves looking at what you spent last month, adjusting a few numbers for the coming month, and then tracking to see if you stay within those broad categories. Zero-based budgeting, by contrast, requires you to assign every dollar of your current income a specific purpose until your total income minus your total outlay equals zero.

From my perspective, the greatest benefit of traditional budgeting for personal finances is its simplicity and ease of maintenance. You do not need complex spreadsheets or daily check-ins.

For example, if you spent $500 on groceries last month, you might budget $500 again this month, perhaps trimming $20 if you want to save more. This method requires perhaps 30 minutes of effort per month.

For someone with a stable income and predictable expenses, traditional budgeting feels effortless. It does not demand that you account for every single cup of coffee or parking meter. Instead, it trusts that your past spending patterns are a reasonable guide for the future.

This low-friction approach means you are far more likely to stick with it over the long term compared to a more intensive system.

On the flip side, the major issue with traditional budgeting is that it silently perpetuates waste and hides spending leaks. Because you simply carry forward previous spending levels, you never question whether that monthly subscription, those impulse buys at the pharmacy, or that slightly too high utility bill are actually necessary.

Traditional budgeting allows creeping lifestyle inflation to go unnoticed. Over time, your expenses rise gradually, and because you are only making small adjustments, you never feel the pain of a true financial review.

For the individual who is struggling to save or pay down debt, traditional budgeting can be dangerously passive, allowing non-essential spending to continue unchallenged month after month.

Conversely, the greatest pro of zero-based budgeting is the absolute clarity and intentionality it forces upon you. Every single dollar is assigned a job, whether for rent, savings, debt repayment, or entertainment.

There are no shadow categories or unaccounted funds. For someone trying to break the cycle of living paycheque to paycheque, this is revolutionary. You cannot hide from a $20 purchase, because your budget requires you to explicitly take that $20 from somewhere else.

Zero-based budgeting also works beautifully for individuals with irregular income. Since you only budget the money you currently have in hand, you never risk spending future earnings.

This method turns budgeting from a passive tracking exercise into an active, empowering decision making process where you consciously direct your resources towards your deepest priorities.

The downsides of zero-based budgeting for personal finances are equally significant. The most immediate drawback is the substantial time and mental energy it demands.

You need to track every receipt, log every transaction, and reconcile your categories daily or at least several times per week. For a busy parent, someone working multiple jobs, or an individual with health challenges, this level of administrative overhead is simply unsustainable.

Many people start zero-based budgeting with enthusiasm only to abandon it by the tenth day of the month, feeling like a failure.

Furthermore, zero based budgeting can become emotionally exhausting. When an unexpected expense arises, such as a car repair or a higher-than-planned medical copay, you must scramble to pull money from other categories, perhaps from your carefully planned grocery fund or your small social outings allowance.

This constant rebalancing can create a sense of scarcity and guilt, turning budgeting into a source of anxiety rather than relief.

Comparing the two side by side, traditional budgeting wins on sustainability and low stress. You are unlikely to burn out on a system that requires only an hour of attention per month.

It is forgiving of small, unexpected expenses. However, it loses on effectiveness. If you have been using a traditional budget for years without reaching your savings goals or paying down debt, the problem is likely the method itself.

Zero-based budgeting wins on precision and results. It is the tool that will uncover the $60 a month you waste on unused subscriptions and the $100 lost to takeout coffee.

But it loses on practicality for many real world lives. For a significant number of people, the perfect budget on paper is worthless if it is abandoned by February.

At the end of the day, the best choice might be a hybrid approach. For example, you might use zero-based budgeting for one month to conduct a deep audit of your spending, identify all your hidden leaks, and then switch to a simplified traditional budget that incorporates those lessons.

Or you might apply zero-based principles only to discretionary categories like dining out and entertainment while using traditional tracking for fixed costs like rent and utilities.

The key is to recognise that personal finance is deeply personal. The right method is not the one that looks most rigorous on a spreadsheet but the one that you can actually live with, month after month, without resentment.

• Carla Seely is the Chief Operating Officer at Freisenbruch Insurance Services Limited and has 26 years of experience in international financial services, wealth management, and insurance. During her career, she has obtained several investment licences through the Canadian Securities Institute. She holds the ACSI qualification through the Chartered Institute for Securities and Investments (UK), the Qualified Associate Financial Planner (QAFP) designation through FP Canada, and the Associate in Insurance (AINS) designation through The Institutes. She also completed a Master's Degree in Business and Management through the University of Essex.

• For further inquiries or suggested topics, e-mail: justaskcarla@outlook.com