By Byron Moore, posted August 14, 2017
Originally published in the News Star and the Shreveport Times on Sunday, August 13, 2017.
Q: I know I should get on a budget. What’s the best app for that?
A: You say you know you should get on a budget.
But why do you say that?
After all, budgeting can be a pain. You already know that, or you’d already be on one. So why should anyone go to all the trouble of getting on a budget?
A budget is a spending plan. It may be simple enough to write on the back of an envelope. Or it may be so complicated that it fills up an electronic spreadsheet.
But whatever level of complexity, most budgets should have a few basic things in common:
Premeditation. A budget is a plan for your spending, recorded first on paper, computer or device, then executed in real life. It lets you see the problems in advance, so you can avoid them in real life.
Communication. Since a budget is often recorded (again, on paper, computer or device), two people can interact over its contents and make decisions about what is most important to them and how those priorities should be reflected in their spending plan (a.k.a., budget).
Moderation. If you spend more money than you make, that’s a problem. You’ll end up in debt.
If you live within your means, that’s also a problem, though not quite as big. Living within your means implies spending all you make and no more. But that’s not good enough – you’ve got to live beneath your means if you are ever to make economic progress. Living beneath your means requires that you moderate your spending; and it results in savings – the basic element in economic advancement.
Preparation. Once you’ve got your spending plan crafted so that you not only avoid short term consumer debt but also save sufficiently, you can then prepare for the future – both short and long term future. Saving money allows you to plan for so-called “big-ticket” items in the near term and for the grand daddy of all big ticket items – retirement.
Once you are clear on the definition of a budget and the purpose of a budget, it’s time to talk about the tools of a budget.
Select the tool that best fits your personality and technology preference. Some people love details. Others loath them. Both can budget successfully, but you’d better choose the budgeting tool that fits your style.
Pencil and paper. No points for style here, but it’s simple, basic and gets the job done. Write down your income, expenses and savings. Make sure the math works so that you’ll spend less than you bring in and put back some for savings (start with 10%). Once you’ve got a plan that works check yourself daily during the month to make sure you are staying on plan.
Envelopes. If you have a hard time with impulse spending, the envelope system is for you. Each spending category gets a physical envelope. The planning occurs when you put just enough cash in each envelope to spend for that week or month. You can’t do this with your house note, but you can with gas, groceries, eating out, entertainment, etc. It’s pretty hard core, but it works.
Spreadsheets. If you work with electronic spreadsheets for your work, you know how useful these things can be. They do all the math for you.
Apps. If you are the sort that asks of every aspect of your life, “I wonder if they have an app for that?” you can bet the answer is “yes!” when it comes to budgeting and personal finance.
Apps with cute names like Mint, YNAB (You Need a Budget), Good Budget, Mvelopes…well, just Google it. There are lots there. Just make sure this is something you want to keep up with to the level of detail required.
A budget is a lot like a financial diet. Some people count every calorie. Others just get a general idea of what they can eat and still lose weight. Or in the case of a budget, how much they can spend and still save money.
You need to spend less than you make, stay out of bad debt, save adequately and communicate adequately about all these priorities with your spouse. Those are the goals of a budget.
How you get there is not so important.
That you get there is all important.