There are probably a thousand ways to organize and do your monthly and annual budget. And there are probably dozens if not hundreds of types of software out there that can help you budget. But, do you really need it? My quick answer is “no”. Unless the software actually helps you follow through on tracking and updating your budget as an “enforcer,” don’t bother. The best way to organize and do your budget is to choose a method that you’ll actually follow through with.
Rachael and I started our budget right when we got married. It seemed like a great time to start fresh with combined salaries and combined expenses.
What budgeting software should I use?
What software did we pick? Well, we didn’t. We actually just tracked our budget on a sheet of paper. Rachael wrote everything down and that’s where we started. Lined, yellow paper. Does it work? Definitely! But it only works because we actually keep up with it. For the first year and a half, Rachael kept up with it. I had never been very good about the “keeping up with it” part of budgeting. I’m great at the big picture stuff. Deciding what expenses go into which categories. Deciding how much should be allocated to various categories and to saving. That’s my jam. Don’t get me wrong, Rachael is good at that part too, so I’m still trying to figure out where I add value to this process, but that’s another blog topic all together.
Today, we both keep up with the budget. Rachael uses pen and paper, and I use Excel because I don’t like doing the math by hand, and I can’t read my own handwriting. For me, budgeting is really a 3 part process.
- Creating the initial budget for the year. (how much will you save? what are the categories and which expenses go under those categories? what will you spend on those categories such as food, clothing, entertainment, gas, etc.)
- Keeping up with the budget on a monthly basis and throughout each month.
- Adjusting your budget (this shouldn’t happen often – once per year, maybe or if you get a raise or lose income. Or you might need to adjust it a few times when you first create your budget if you estimated some expenses incorrectly)
I guess, a fourth step would be keeping track of your money and what it all is earmarked for. We talk about that process in more detail here.
So, how do you actually stick to your budget whether you use software or not?
Here’s what we do:
- I start with my blank Excel template for the month and Rachael starts with her blank chart of paper.
- As we go through the month and spend money, we keep every single receipt and store it in our home office. If it’s an emailed receipt, we will email it to each other. So receipts are only in 1 of 2 places. In our email inboxes or in our home office in the receipt pile.
- As the receipts pile up, we record the appropriate amount under each category. Costco receipts go to groceries. Chipotle receipts go to eating out (we usually have several of these). Utility bill goes to utilities. Etc.
- Step #3 is really the key to staying under budget. We try to keep up with receipts weekly or every two weeks so that we know where we are. It makes decisions such as “should we go out tonight?” or “should we get this side table?” very easy, especially as you get toward the end of the month. If you don’t have the budget for it, the answer is “no”.
- Don’t go over budget. If you have to, eat scrambled eggs for the last two days of the month to stay under your grocery budget. I mean, if you’re not going to stick to the budget, why set it?
If you’re using budgeting software, you still have to keep up with your receipts and transactions (step 3 above). I used Mint for a while which was helpful in that it pulled all my credit card transactions into their system and I could tell it which category it went to. However, it wasn’t fool proof in that not everything was correctly categorized and I didn’t do a very good job keeping up with it. At the end of the day, the software is great if it helps you keep up, but if it doesn’t, I’d say it doesn’t matter what you do. Step three is the key.
If you want to get started easily, I’ve created a blank Sample Budget that I use in Excel that you can access for free right here!