Budgeting Tools

Your choice of budgeting tools needs to reflect your need, your personality and your lifestyle. If you are more comfortable with a ledger than a computer then you might prefer a paper and pencil budgeting tool over money management software. If you are always on the go and need access to your budget information away from home an online budgeting solution might be more to your liking.

The one thing that a budgeting system cannot do for you is to make you use it. You need to supply the diligence and discipline to make a budget work. Regardless your choice of budgeting tool, You need to remember that the tool is there to help you be successful in managing what God has already given to you.

Cash Budget
A cash budget is not really a budget per se but a strategy for implementing your budget and dealing with your every day expenses. A cash budget is often used in conjunction with the envelope budget system. Here is how a cash budget works: When you get paid, you cash your check and allocate your income to all of your different categories. Each category is assigned an envelope. One envelope is for food so you put your grocery money in the envelope and when you go out to buy groceries you take the cash out the food envelope, pay for your groceries and put the change back in the food envelope. You do this for every category

Cash Budget - Pros
The great thing about this budgeting tool is that it is very easy to implement and very easy to understand. In the example above you get to decide how you will spend your money in the food envelope. You are free to buy Porterhouse steaks and eat them every night of the week if you wish. But here is the catch, when you run out of money in the envelope, you quit eating until you get paid again and put more money in the envelope. The cash budget helps you see, in a very visual way, how much you can spend on food. If you start running low on money in the food envelope then you can start to get creative with what you already have in the house or start having more meals with rice and beans. You have total control over how you spend your money. A cash budget also helps you be very intentional with your spending.

Cash Budget - Cons
The biggest drawback that I see to this system of budgeting is that a cash budget can be very cumbersome, having to take some of your envelopes with you when you leave the house. This is often easier for women because they have a purse to put the envelopes in. A cash budget is also hard to implement uniformly; you don't want to send cash in the mail to pay your utility bill, for example. However, the biggest drawback is the ease at which you can transfer money from one envelope to another. I am not saying that you shouldn't do that but transferring back and forth between envelopes can lead to a greater lack of discipline and not staying within the limits of what you said you were going to spend for a given category.

Pencil and Paper
The pencil and paper method has been around as long as there has been a need for accountants. The pencil and paper method is the basis for every other system. This method can be as simple as a hand printed spreadsheet with the categories across the top and the days down the side or as formal as a ledger. It all depends on what fits your lifestyle and personality.

Pencil and Paper - Pros
The nice thing about the pencil and paper method is that it is very inexpensive. Anyone can keep track of their expenses on a piece of paper and, at worst, organize them in a 3-ring binder. The other really good thing about the pencil and paper method is that this method will force you to understand the budgeting process better than a program will where you just punch in numbers and see what comes out the other side.

Pencil and Paper - Cons
The flip side is that the pencil and paper method can be labor intensive, depending on the level of detail that you go into. You have to add and subtract the numbers yourself and there is the potential of keying something in wrong. If you choose this method, I would highly recommend a calculator with a paper tape so that you can compare what you punched into the calculator with what you intended to punch in.

Home Budgeting Software
Home budgeting software has been around for a long time. Crunching numbers are what computers do best. There are many to chose from and two that I recommend are Money Map Software from Crown Financial Ministries and Quicken from Intuit.

Home Budgeting Software - Pros
Home budgeting software can make the organizational part of budgeting extremely easy. Once you do the setup all you have to do is record your expenses and the software will let you know how you are doing. Home budgeting software can be a great time saver. Some programs will tell you how much you have spent in a category and some software will let you know how much you have left in a category. Some software even has the ability to track your investment portfolio. Of course the more bells and whistles the higher the price you will pay. However, you can find good budgeting programs for less than $100

Home Budgeting Software - Cons
The down side to home budgeting software is that, depending on the program, the software can be rather complex to set up and to use. Don't get lost or hung up with all the bells and whistles that some software programs offer. You don't want to over analyze your budget. Another thing to consider is that because the software makes budgeting very easy to do, some people will put off recording their expenses because recording purchases becomes such a trivial matter to do. This is a trap and you need just as much diligence and perseverance to record your spending every day or maybe every other day. Don't put off recording your expenses for too long or you are likely to induce errors.

Online Budgeting
The newest budgeting tool available is the online budgeting tool. Once your budget is set up the online system will collect all of your financial transactions. It doesn't matter if your purchase is by check, credit card, debit card or direct debit from your savings account, the online budgeting tool will gather all of those transactions into one place for you.

Online Budgeting - Pros
Online budgeting,like Mvelopes, can be a great convenience. Online budgeting allows you access to your financial information from your PC at home, computer at work or your cell phone while you are on the road. Online budgeting is simple and easy to use as well as being safe and secure. Mvelopes uses Secure Socket Layer (SSL) encryption technology to protect your sensitive information.

Online Budgeting - Cons
Online budgeting is probably the most expensive option of all the budgeting tools listed, even if you were to upgrade your home budgeting software every year. You of course would want to budget this subscription expense. But, if money is tight, this might not be the option for you, in spite of its incredible convenience.