How to choose the right budgeting system for yourself

Want to get out of debt and achieve your financial goals? The first step is to establish a budgeting system. There are a number of tools available to help you set and stay on budget, but it is important that you pick a system that makes sense for you.

Budgeting system

“Budgeting is a crucial part of responsible financial management, but it only works if you can translate the concept into an actual tool that lets you execute your plan. The key to successful budgeting is to find a system that you can stick with for the long term. You’ve got to find a system that is compatible with your personality, goals and your organizational style,” says Jeff Schwartz, executive director, Consolidated Credit Counseling Services of Canada.

What’s your budget style and what system makes the most sense for you?

The importance of tracking

“You may think of a budget as a framework to help you spend within your means. That’s true, but it is as essential to have a system within your budget that tracks your spending. The reason that you need to develop a budget is not just so that you can allocate your monthly spending, but so that you can set up a system that lets you track your progress. The only way to determine if your budget makes sense for your income and expenses is to be able to monitor each and every dollar that goes in and out,” says Schwartz.

Details matter when you are trying to reach your financial goals, like paying down debt.

The envelope please

One tried and true method of budgeting is to place cash in envelopes marked with each of your budget categories. Although it is decidedly old school, one benefit of this method is that it is the most tactile. Some people find it very helpful to have these kinds of visual cues to help them embrace the “when it’s gone, it’s gone” mentality.

Some drawbacks are that you’ve got to carry a great deal of cash around at a given point in time, which isn’t super convenient. There isn’t a built-in tracking system with this strategy, so you’d need to develop another method to fulfill that part of budgeting.

The spreadsheet

Using a spreadsheet on your computer can be a great way to allocate your spending and track your expenses and you generally don’t need to be a complete spreadsheet whiz to be effective, because it uses a lot of basic functions.

Some benefits are the level of detail and that it is easy to monitor and identify where you have fallen short in your budgeting goals. Some drawbacks are that it is a little more user intensive- as in you need to always input the data. You need to remember to do so and you need to commit to doing it. There is, of course, always the possibility of human error in this case too.

Online budgeting

If you are about all things digital, you may find the convenience of online software or budget apps a lifesaving tool in being able to stick to your budget. There are a number of ones available, but Mint is popular and supports most Canadian bank accounts. It lets you centralize your budgeting electronically, link your bank account and your bills too.

You Need a Budget (YNAB) is online software that is also popular and offers many of the same features. This one charges a fee though, so make sure that this expense makes sense in your budget.

An extra point of caution when you are dealing with your finances with apps online- make sure that the app/software you choose is secure. You could be making yourself vulnerable to fraud.

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