BUDGETING METHODS

by Matt B

To budget, or not to budget. That is the question.
Budgeting is not for everyone.”-Poor personal financier.
For some, setting and maintaining a budget presents too many obstacles. Income may fluctuate depending on sales or other factors, making budgeting just impossible. You may rely on money that does not come from a steady job and changes. You may also depend on someone else in the family who has been laid off or has had their hours cut at work. Sticking to a budget is also too difficult for some. Basically, there are a million excuses to not have a working budget, but no good excuses to at least keep a tight leash on your finances. Here are a few (conventional and unconventional) methods of budgeting you can try out to see what works best for you.

The Envelope Method
This method was once very popular and effective, and still can be. An envelope is kept for each expense: housing, transportation, cable, phone, etc. With every paycheck, the envelopes receive a certain portion of money. If followed correctly, when bills or expenses arise, the corresponding envelope will contain the necessary funds to cover the expense. The envelope method has it’s drawbacks. Although it is easy to correctly implement this method with some tweaking along the way, in a world where cash is becoming less effective and plastic is king, the envelope method often falls short.

Online Tools method.
There are now countless tools online to assist you with your budgeting headaches. So many in fact, that instead of listing the pros and cons of all of them is completely moot. Of course some will be more effective for you than others, but until YOU try them yourself or research them, you will not know which one works best for you. So instead of writing complete recaps on all of these tools, I choose simply to provide links to many that I have used or that have a good reputation.
Quicken-Using quicken in conjunction with your bank account may be an eye-opening experience. See how much you spend, and where. Simple and effective.
You Need a Budget-Another tool with great features that looks at traditional budgeting, and mixes features of Quicken with “big picture” goals.
Spending Diary-Manually enter daily expenditures and track with a calendar. This is pretty much a spending journal.
Mint-Mint is a totally FREE money management website, with budget trackers, money management software, and countless other helpful resources.

I could go on and on about online budgeting tools, but a simple search will yield many results, one of which may be ideal for you!

Notebook Method.
This method may be a little “old school” for many, but it can still be effective, and requires more attention and time than online methods, which could be a good thing. It is pretty self-explanatory. Keep a money journal of everything you make and spend. Balance said journal to make yourself profitable. Paying yourself first and stashing this money away should be top priority when using the notebook method. If done properly, you will soon have the notebook method down to a science. After doing it enough, your budget will become an afterthought. This is the best method to develop strict, effective financial habits.

Budgeting is hard. Budgeting is also necessary. Whether your home budget is a strictly followed, stringent plan to account for every penny, or a loose, get the bills paid and have some left over kind of budget, it is something every household needs.

When setting up a budget, keep in mind that your first attempt will not be perfect. Every household will need to allocate different percentages of income toward varying costs. Constant change and evolution of your budget to adjust to changes in income and expenses will help you reach financial goals faster and more efficiently.

Please do not hesitate to curse me out or chastise me if I missed any good budgeting methods that do not fit into these categories. I’m not the brightest!!

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June 27, 2012 at 9:32 pm

{ 3 comments… read them below or add one }

Miranda March 17, 2009 at 10:21 am

We don’t have a to the penny budget, but we do have “spending ranges”. We save a certain amount, we give some to our church and we have set expenses. For everything else, we have a spending range. We try to keep our unfixed expenses to the low end of the range, though.

Trevor @ Financial Nut March 17, 2009 at 5:22 pm

You’re right… it is hard! It takes time to get it up and going and get used to maintaining. However, once you create a habit of good budgeting, it’s not difficult at all. It’s like brushing your teeth before you go to bed (when you were a kid, of course!). We all hated it when we were younger! But you just get used to it and now you don’t even realize you do it.

Hmmm… interesting comparison, eh? 🙂

Heyagainlando March 17, 2009 at 6:03 pm

Ewwww…you stopped brushing your teeth at 18? Sorry Trevor, that is just weird.

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