Like eating a healthy
diet, maintaining a well-planned budget is generally more of a wish rather than
a reality.
This is because planning and keeping to a
strict budget entails a lot of work -- so does counting calories and hunting
for and preparing organic and nutritious food. Balancing your checkbook monthly
is already a tedious process; consider how much more time you will need to
evaluate every purchase you make.
Electronic banking and
computer apps can help ease up the task. Whereas before you would need to check
every receipt and expense made, now, software programs such as Quicken and
tracking websites like Mint.com can make the work much easier with your
computer.
With an Internet
connection, you can access your bank account and credit card transactions and
download them to your computer. Depending on the services provided, such
information may even include type of expense for certain items. Using the data,
you can derive a general perspective of your financial situation where you are
and what you need to do to improve your lot.
Remember, these
applications are only as good as the data they receive and process. Not many
individuals have such simple finances as that of using only a credit or debit
card for all their purchases. Usually, the small cash purchases you often
overlook pile up to a substantial amount that impacts on your finances. Since
those cash expenses do not appear on any bank or credit card statement, your
budget app will not churn up accurate statements -- unless you input such
information yourself.
A solid comprehension
of your income and expenses is vital in building a personal financial budget;
hence, try to input as much detailed information as you can. Nevertheless, if
you find that task above your skills, try these guidelines to help you obtain
financial self-awareness.
All-cash Mode
The easiest strategy
to budget is to go on all-cash mode in all your financial transactions. There
are several ways to do this. First, cash your salary checks and then use the
cash on hand for expenses – although having so much cash with you may not be a
safe way to do it. Second, you can deposit your checks and take out a certain
amount of cash you will need for a few days or a week each time. This is a
safer way.
But you cannot avoid
using alternative means of transaction other than by cash. Banks, for instance,
may demand customers to pay mortgages by automatic withdrawal from a bank
account. Utilities and other firms that bill on a regular basis have required
clients to transfer to automatic billing as it saves time and expense for all
parties concerned. If you cannot avoid those, transferring most of your
transactions to cash will help provide you with a better picture of your
financial health or un-health.
After every month,
check how much cash you have on hand, if any at all. This will give you an idea
if your expenses are within your income. While this may not tell you specific
information on where exactly your money flows to, it helps you appreciate how
you can manage the small cash expenses which are often bypassed by most
tracking programs.
Use the envelope method
This is similar to the
cash method, although it requires a little more planning. As in the cash
method, encash your paycheck; but categorize the cash into several items. For
example, if you receive $4,000 monthly, you can put $1,000 in an envelope for
your mortgage payment, $300 for gasoline, $350 for dine-out food, $450 for
groceries, $500 for utilities, etc. Divide your cash into as many types of
payments as you can afford to monitor.
This approach allows
you to gain greater awareness of how you dispense with your money. For
instance, if your grocery envelope still has cash at the end of the month but
your dine-out envelope empties out sooner, it tells you where you spend more
time eating out rather than at home. Likewise, based on the number of envelopes
you have, this method can easily show you the weak areas in your finances you
need to strengthen.
The hybrid method
These various schemes
can be effectively utilized even if you do not use an application in your PC.
Nevertheless, with an app, they can help fill up the gap which such software
programs usually miss out.
For instance, your app
may tell you that you earn an average of $700 monthly beyond what you are
spending on tracked categories. However, a quick check tells you your checking
account has not increased the same amount every month. Most possibly, the
difference comes from the cash expenses that are not inputted into the app.
Using either the cash or envelope method for that $700 will reveal a clear
picture of where that surplus is flowing into, providing a more comprehensive
perspective of your total expenses.
Indeed, budgeting
requires quite an investment in terms of time and effort. But imagine the huge
benefits you will derive from the savings on cost and decrease or removal of
unwanted expenses. A solid budget plan can help you raise some money you
already have toward making
some savings or investments, not to mention the cash you will have for
emergency purposes. Such easy-to-do steps will help even the most time-strapped
individuals determine their financial situation