Most people only look into budgeting when they are trying to save money for a major expense, like a vacation, a car or a new home. The truth is that budgeting is an essential skill that you should practice throughout your daily life, and you probably would — if only it were a bit easier.
Because budgeting requires organization and willpower, you might have failed to adhere to a budgeting plan you developed in the past. Fortunately, budgeting can be easy if you put in a little more preparation. Here’s how.
Choose a System
It might be that your budgeting attempts of the past have failed because you chose the wrong budgeting system for you. In truth, there is no one-size-fits-all method of learning how to budget; you need to experiment with different systems to better understand which style suits you best. Here are a few commonly successful budgeting systems to consider:
The Envelope Method. You give yourself a monthly spending limit for different categories of expenses, like groceries, gas, clothes shopping, eating out, etc. Then, each month you withdraw those amounts in cash and sort them into labelled envelopes. Once you spend up to a limit, you can no longer make purchases in that category.
The Ledger Method. You set a weekly or monthly spending limit for different categories and write these down on a spending log. You make note of purchases, subtracting from your budget as you go. You can tweak your budgets every week or month to better fit your spending and saving needs.
The Template Method. Both Microsoft Excel and Google Sheets have a bevy of budgeting spreadsheets to choose from. Different templates are set up in different styles with different timelines and different spending/saving goals, so you should peruse your options and try a few that fit with your needs and expectations.
Make a Binder
Some people are more motivated to complete a task if they can invest some time in personalizing the experience. Making a budget binder is a way to make the budgeting process feel more creative and fun while helping to organize your budgeting efforts. Budget binders keep all your spending and saving information in one place, so you can easily understand your past habits and your future goals. Some standard requirements of a functional budget binder include:
- Budget planners, for calculating different spending limits for different categories of expenses
- Monthly calendars, for writing monthly financial goals, due dates for bills and other spending events
- Monthly budget forms, for noting when you get paid and what you spend
- Savings tracker, for noting major expenditures (like vacations or rent) and following savings progress
- Cash envelopes, for keeping your envelopes organized (if you opt for the envelope method)
You can find coordinated budget binder packs available online, for you to print out and assemble, or you can take the time to create your own with custom color schemes, fonts and formats. You should feel free to be creative with your budget binder; after all, it’s only for you.
Use an App
If the manual aspect of budgeting is what caused you to fail in the past, you should be thrilled to learn that there are dozens of digital budgeting solutions available to make the budgeting process a bit more streamlined. Many apps link directly to your bank account, so you don’t have to save receipts or fuss with numbers. Plus, more advanced apps help with savings and investments, so you can seriously increase your personal finance literacy and capability. Here are some of the best budgeting apps available today:
- Mint. An introductory budgeting app that automatically sorts spending into categories and suggests budgets based on your lifestyle.
- YNAB. A straightforward budgeting app that helps you save for a specific goal and uses approachable visuals.
- Personal Capital. A more advanced app that assists with tracking net worth, cash flow and investments.
- Albert. A set-and-forget budgeting solution that automatically separates your money into spending and savings accounts.
Finally, many people struggle to stay accountable to their budgets. While an automated system can be beneficial, it doesn’t necessarily allow you to improve your willpower or gain better spending habits on your own. Thus, you should build accountability into your budgeting efforts. Perhaps the best way to stay accountable is to have someone to talk to about your budget and progress. A romantic partner is a good option — especially because financial woes are a major cause of heartbreak — but you might also make a pact with a friend to save more money. Then, neither of you will tempt the other to be financially wasteful.
Though a budget can be a short-term tool for saving a specific amount of cash, the act of budgeting can help you gain financial literacy that will improve your lifestyle for life. The sooner you master the art and science of budgeting, the better.