Maybe a better term than budget is spending plan. The goal behind putting together a spending plan is not so much to limit your spending, but rather to make sure your money goes where you want it.
1. Envelope system.
I remember going to the grocery store with my grandmother and her “grocery” envelope. Not only is this a tried-and-true method, but there’s something about doing the process in writing (at least initially).
The simplicity of this system is probably why it is so effective. Your paycheck is converted to cash and distributed among envelopes pre-labeled with appropriate spending categories. The hard part is obviously how much goes into each envelope. When you spend money, for example at the grocery store, payment is made from that envelope. If there is no money left, you either do not make the purchase or you take money from another envelope. Thus overspending is prevented.
This free site enables you to track your checking accounts and credit cards in one place and helps put together an initial budget. Please contact us if you would like additional help in setting up a Mint account.
3. Three buckets strategy
The three buckets strategy is another method. Expenditures are divided into only three categories making your finances easier to track. Categories can be:
Funds committed to pay (such as mortgage)
Funds needed for that week
Savings for future goals such as vacations, cars, etc.
I use Quicken to track my spending plan. The program is more robust, but a little more complicated and entails a purchase fee. Please feel free to contact us if you would like help in setting up a Quicken account.
5. Use an app
The following website has a good summary of available apps:
Importantly, do not allow yourself to be bogged down in the details. This is a living document. You must be flexible. You will be constantly adjusting your budget as your life is constantly changing.