"Budget"; a light little word that has some heavy connotations. Conversations opening with "let's talk about the/my/your/our budget", are not usually ones that thrill us. Keeping track of how much of your money is going where and when though, can really help to not only to limit or eliminate unnecessary expenses and unwanted waste, but getting a budget organized means you can get your bills covered and spend some money on a little frivolity with confidence. We talked a little about the benefits of making sure you make room for fun-money last year. Today we'll explore some of the ways to organize and track a budget, first exploring some of the ways anyone can organize, set-up and monitor a budget for free.
Getting on Track to Track Your Budget A few preliminary steps must be taken in order to utilize any of the budgeting methods and tools that will be discussed. Getting these steps taken care of first not only streamlines the processes of recording and tracking a budget, but may be useful in determining what methods and tools will be the most useful for managing your accounts and spending.
Step 1
Determine whether you want to budget on a monthly, bi-weekly or weekly basis. Managing expenses on a month to month basis is the time-span most articles and personal finance books use to discuss creating, tracking and keeping a budget. However, some may find that tracking expenses on a bi-weekly or weekly basis easier to manage. A budget is most effective if all expenses and sources of income are recorded and tracked. Recording over thirty days worth of expenditure may seem a little daunting, especially for anyone trying to tackle their budget for the first time. Structuring a budget for a shorter time span can be less intimidating for first-timers because the budget plan "resets" every seven days instead of every four weeks. Others find it helpful to build their budget around their pay schedule. If scheduling a budget on a weekly basis appeals to you, but you have monthly expenses such as rent or a mobile phone bill, it is still easy to set up for a seven day schedule. Simply determine what your monthly expenses are, and divide by 4.
Step 2
Determine all sources of regular income.This includes things like your regularly scheduled pay, and any other form of payment you receive on a regular basis such as annuities, dividends, and account interests.
Step 3
Figure out what your expenses are, how much they cost, and then record them. It is recommended that you divide expenses into two categories: fixed and variable.
Many personal finance books and articles recommend further dividing these expenses into tiers of: fixed necessities (rent/mortgage payments, utility bills like gas. electric and water, property or council/city tax etc.), fixed goods and services you could technically live without but wouldn't want to (cable, internet, mobile phone, *car payment), variable necessities (groceries, toiletries, *certain kinds of insurance), variable goods or services you wouldn't want to live without, and so on.
Step 4
Check that your expenses don't exceed your income. If you've got more money coming in than you do going out, you're in good shape and ready to start tracking your budget, and determining if and how you can streamline expenses to reduce waste and free up some cash for a little fun. If you're spending more than you're making, it's time to either a)increase your income, b)reduce or cut your expenses or c)both a & b. While most of us would prefer to increase our income, this isn't always possible. Usually it's easier to effect change immediately by cutting or reducing an existing expense. Unfortunately this isn't always possible either.
Keeping Track
Pen and Paper
This suggestion may seem a little retro in this age of Microsoft Office, google docs, and iPhone apps, but for some people, physically writing out their expenses and accounts is the easiest and most effective way to balance a budget. If you've been balancing a cheque book for several years, this method is very similar. All that's needed for this method are things most already have: paper, writing implement(s), and some basic arithmetic skills.
Electronic Spreadsheets While most people are likely already familiar with Microsoft Excel (and already familiar with whether they love it or hate it), some may not be aware of the electronic spreadsheets available from Google docs. The electronic spreadsheets in Google docs do most of the things for which I've ever used an Excel spreadsheet. Google docs are free to use, and have the advantage of being instantly shared to any of your Google contacts if you so choose. This feature is great for people sharing expenses, like roommates, as the records are kept in one place, on one spreadsheet, and may be viewed, edited, and updated instantly by any of the contacts with access to the document.
Mobile Applications
Frequently hailed as the latest and greatest in personal technology, the mobile application has become an incredibly popular method of doing anything. Budgeting is no exception; there is a vast array of mobile applications for tracking spending and income across a variety of platforms. If you own a smartphone or tablet device, this may be the most convenient method for you. However, if you've found your experiences with these technologies to be less than intuitive, then this is probably not the best way to manage your expenses. Not all apps are created equal, but we're finding that some of the ones we've tested so far aren't as straightforward and easy to use as it seems they should be.
Free Software and Online Money Management Tools
Perhaps offering a middle ground between the solidity of writing with pen and paper and the digital ether of the mobile application, are free online money management tools. Free programs to track transactions abound, and many offer features like email and SMS reminders, expense graphs and charts, and the option to import account statements or export data to other programs like Excel.
As there are so many different budgeting apps, programs, and tools to choose from, it can be hard to tell sometimes if you've made the right choice. Fortunately, all of the options explored today are free to try!
Getting on Track to Track Your Budget A few preliminary steps must be taken in order to utilize any of the budgeting methods and tools that will be discussed. Getting these steps taken care of first not only streamlines the processes of recording and tracking a budget, but may be useful in determining what methods and tools will be the most useful for managing your accounts and spending.
Step 1
Determine whether you want to budget on a monthly, bi-weekly or weekly basis. Managing expenses on a month to month basis is the time-span most articles and personal finance books use to discuss creating, tracking and keeping a budget. However, some may find that tracking expenses on a bi-weekly or weekly basis easier to manage. A budget is most effective if all expenses and sources of income are recorded and tracked. Recording over thirty days worth of expenditure may seem a little daunting, especially for anyone trying to tackle their budget for the first time. Structuring a budget for a shorter time span can be less intimidating for first-timers because the budget plan "resets" every seven days instead of every four weeks. Others find it helpful to build their budget around their pay schedule. If scheduling a budget on a weekly basis appeals to you, but you have monthly expenses such as rent or a mobile phone bill, it is still easy to set up for a seven day schedule. Simply determine what your monthly expenses are, and divide by 4.
Step 2
Determine all sources of regular income.This includes things like your regularly scheduled pay, and any other form of payment you receive on a regular basis such as annuities, dividends, and account interests.
Step 3
Figure out what your expenses are, how much they cost, and then record them. It is recommended that you divide expenses into two categories: fixed and variable.
Many personal finance books and articles recommend further dividing these expenses into tiers of: fixed necessities (rent/mortgage payments, utility bills like gas. electric and water, property or council/city tax etc.), fixed goods and services you could technically live without but wouldn't want to (cable, internet, mobile phone, *car payment), variable necessities (groceries, toiletries, *certain kinds of insurance), variable goods or services you wouldn't want to live without, and so on.
Step 4
Check that your expenses don't exceed your income. If you've got more money coming in than you do going out, you're in good shape and ready to start tracking your budget, and determining if and how you can streamline expenses to reduce waste and free up some cash for a little fun. If you're spending more than you're making, it's time to either a)increase your income, b)reduce or cut your expenses or c)both a & b. While most of us would prefer to increase our income, this isn't always possible. Usually it's easier to effect change immediately by cutting or reducing an existing expense. Unfortunately this isn't always possible either.
Keeping Track
Pen and Paper
This suggestion may seem a little retro in this age of Microsoft Office, google docs, and iPhone apps, but for some people, physically writing out their expenses and accounts is the easiest and most effective way to balance a budget. If you've been balancing a cheque book for several years, this method is very similar. All that's needed for this method are things most already have: paper, writing implement(s), and some basic arithmetic skills.
Electronic Spreadsheets While most people are likely already familiar with Microsoft Excel (and already familiar with whether they love it or hate it), some may not be aware of the electronic spreadsheets available from Google docs. The electronic spreadsheets in Google docs do most of the things for which I've ever used an Excel spreadsheet. Google docs are free to use, and have the advantage of being instantly shared to any of your Google contacts if you so choose. This feature is great for people sharing expenses, like roommates, as the records are kept in one place, on one spreadsheet, and may be viewed, edited, and updated instantly by any of the contacts with access to the document.
Mobile Applications
Frequently hailed as the latest and greatest in personal technology, the mobile application has become an incredibly popular method of doing anything. Budgeting is no exception; there is a vast array of mobile applications for tracking spending and income across a variety of platforms. If you own a smartphone or tablet device, this may be the most convenient method for you. However, if you've found your experiences with these technologies to be less than intuitive, then this is probably not the best way to manage your expenses. Not all apps are created equal, but we're finding that some of the ones we've tested so far aren't as straightforward and easy to use as it seems they should be.
Free Software and Online Money Management Tools
Perhaps offering a middle ground between the solidity of writing with pen and paper and the digital ether of the mobile application, are free online money management tools. Free programs to track transactions abound, and many offer features like email and SMS reminders, expense graphs and charts, and the option to import account statements or export data to other programs like Excel.
As there are so many different budgeting apps, programs, and tools to choose from, it can be hard to tell sometimes if you've made the right choice. Fortunately, all of the options explored today are free to try!
