We’ve discovered that there almost as many ways to budget as there are people talking about it. There are expensive systems, cheap systems, apps, websites and grandma’s system for budgeting. With so many choices, it’s hard to know which kind will be the best budget for you!
What Kind of Budgeting System will work best for you?
- Lots of people talk about having a budget for their money.
- Lots of people want to budget.
- And lots of people start to budget . . . but then stop.
Honestly, there is no “Right Way” or “Only Way” or “Best Way” to budget your money.
Looking for the Best Budget System
More or Less Successful budgeting depends less on the system and more on the consistency of the person using the system.
The best budget isn’t a sheet of paper, a spreadsheet or an app, with all of your anticipated monthly expenses listed in orderly columns, filled out in January and then forgotten. That worksheet, while it might be somewhat accurate, isn’t going to help you manage your money on a week in and week out basis.
Consistent use of whatever system you choose is the key to budgeting success. And for us, consistent means that we reconcile, balance or “do” our budget twice each month.
Three Different Types of Budgeting Systems
We’ll discuss how we do our budget in another article, but for now, we want to identify the three different best types of budgeting systems we’ve seen used successfully by families we know.
1) The Cash Envelope System – is this the best budget?
While many people may think that this type of system was invented by popular radio host Dave Ramsey that just isn’t so. Envelope budgeting has been around for as long as there have been envelopes (about 3000 years).
Using a cash system is one of the easiest ways to control those budget categories that can quickly be overspent. A family usually doesn’t overspend on Fixed Expenses like utilities, car payments or a mortgage. However, Variable Expenses like eating out, date nights, clothes shopping or grocery shopping are quite a different story.
Theses variable expense budget categories are perfect candidates for using cash envelopes because of the temptation to overspend and because most people just aren’t sure what they have been spending each month.
Because cash is tangible and visible, being able to look inside your recreation envelope to see that you only have $6 and 37 cents left for the week provides a perfect visual cue to select an affordable option, find a coupon or simply do something that costs nothing.
The beauty of cash envelopes is in the weekly set up. Many people have a simple list of cash they need to take out of each weekly / bi-monthly paycheck; go to the bank and have the teller give them the same amount of cash in specific denominations each time. Then they divide the money into the specific envelopes and move on with life. Simple, fast and easy.
Other friends have taken cash envelopes one step further and keep their receipts or a small ledger in each envelope to help them know where their money is going.
We started our budget using cash envelopes, but because we didn’t spend it all each week, a large amount of cash accumulated in our apartment. We didn’t like the idea that someone could break in and steal our stash, so we started using budget method #3 below. But despite our objections, there are many people who think that cash envelope systems are the best budgets out there.
2) Computer Budgeting – is this the best budget?
There are a number of computer/internet based budgeting systems / apps such as Mvelopes.com, EveryDollar, Mint.com, Quicken, YouNeedABudget.com and home made Microsoft Excel spreadsheets. We have tried a few of these systems as have some of our friends. Most of the systems are designed to track expenses after the fact, and not to accumulate money prior to spending.
Positives of Computer Budgeting
We love the fact that some of these systems link directly to your bank account. This eliminates the need to manually enter each expense into the budget, but you still need to categorize each expense.
Downsides of Computer Budgeting
Privacy concerns Your most sensitive data is susceptible to being hacked.
Access If you don’t have internet access, you don’t have access to your budget.
One person While this isn’t insurmountable, it’s harder to work as a couple when information is managed on a computer – usually one person “drives” and the other just looks on or is not involved.
Negative Balances In some systems money in a specific budget category that is carried over from one paycheck cycle to the next is shown as a negative number.
Years ago we did a time test of doing our budget on paper (#3) and Quicken. They both took about the same amount of time, but where we showed an excess, for example in our recreation account because we hadn’t spent the full $40 per paycheck amount, Quicken showed a negative number. That kind of accounting discourages thriftiness. But once again, there are some people who swear that computer based budgets are the best budgets out there, and we won’t argue with them.
3) Paper Budgeting – is this the best budget?
We’ve been using our “On-Paper” budget system since the first year of our marriage and love it. Basically we se set aside a predetermined amount of money each paycheck on paper account sheets, much the same as cash envelopes. Our system evolved over time and is designed to make it easy for couples to work on their family budget together and without stress (it works well for singles too),
A Budget That’s Portable
We’ve taken and used our budget system at kids sports practices and lessons, on long car drives, or when sitting on the couch watching one of our favorite movies. We are both so familiar with our budget system that when life gets busy, one or the other of us can do it solo. We just check in with each other before recording the final deposits / budget numbers.
Budgeting that Brings Confidence and Smiles
Saving money in advance gives us incredible financial confidence. For example, it feels great knowing that we have money budgeted for Christmas presents, because each budget cycle we set aside a little bit of money in our gift account. Buying Christmas presents isn’t a financial strain, but a joyful hunt, all year long. And it doesn’t come with a credit card bill 30 days later. That is stress free budgeting at it’s best, and that makes us smile! And of course, we’ll tell you that a paper budget is the best budget there is . . . because we think it’s true.
The bottom line on these three types of budgeting systems is to be committed to consistency. If you’re looking for the best budget system for your family, give these a try for a couple of months each and then decide what fits best with your lifestyle and spending habits.
Remember that money flows to those who actively manage it. And the more you actively manage your budget, the more money will flow to you! Having money flow to you is the best budget there is!
Read the entire Budget Series Here
- Six obstacles to the perfect budget
- How to make the Best Budgets for Savvy Spending
- The Amazing Key to the Most Powerful Household Budget Ever!
- How to Build Confidence with a Written Budget