Pick the Best Budgeting Tool for You

When my wife and I got married 37 years ago, we took a week-long honeymoon which cost the better part of our savings. I know, I know. But we were young and starry-eyed. The day after we returned and started back into real life again, I was notified by phone that I had just been laid off. My wife was at work, and so I called to give her the good and bad news. Good news: I don’t have to do business travel anymore. Bad news: I have no job. It was a good thing the marriage was official. I had already checked with the county before I called her.

We weren’t quite as starry-eyed as the week before. It didn’t help that my contribution to the family finances included a box load of credit card debt from my previous marriage.

We knew we had to start putting a plan together. We pulled out our eight-column yellow journal pad, sharpened our pencils, fired up our fancy brand-new electronic calculator and stared at each other. We had no idea what to do.

We didn’t have the World Wide Web to use yet. I don’t think most people even knew it was coming. There were no personal financial counselors at that time. We were on our own.

So we developed a plan based on three concepts: We recorded where we were financially, we agreed on where we wanted to be in two years and we started working the numbers to connect the beginning to the end. We used this journal to project what our cash balances would be and decided to monitor that once a week. I found a job three months later, and we kept using our budgeting system. We did modified the plan over the years and still use it to this day — except now we use a spreadsheet instead of the journal pad.

Today, financial planning and budgeting is so much easier. You can research how to budget with the click of a mouse. You can also find personal financial counselors online to assist with the planning process. The biggest hurdle, however, is deciding which system to use. There are so many different apps, websites and theories out there; the hardest part is to decide which one is best for you.

Here are a few tips from experts in the personal financial planning field that will help you get started or improve your current method.

1. Before you start looking at different systems, get your family or financial partner to develop and agree on the goals. Is your priority to pay down debt, increase your savings, reduce spending or something else? Make sure the goals are as specific and realistic as possible.

2. Next, document where you are currently. Record every single income and expense item and note the dates they will occur. The fixed items are the easiest: The rent or mortgage is $____ and due every first of the month. Net paychecks are $____ and are deposited every other Friday or on the first and 15th. Add in any extra income from side jobs. Since these amounts will probably be variable, use the minimums so any extra will be a bonus. Then tackle the variable items like electric bills, grocery bills, etc.

3. This is a very good time to also create a personal financial statement which shows the value of your assets and the amount of your debts. Tracking your net worth is the best indicator of the direction of your financial progress.

4. Next, do some online research about different types of budgeting plans, and see if there is one that fits your current style. By style, I mean that everybody has a different way of doing things, and you are probably not going to change that style overnight. How often do you want to input data or monitor the plan? Are you comfortable using methods that are more automated and can sync up to your credit card and bank accounts? This reduces the work, but you may be uncomfortable giving a company access to logins and passwords.

5. Finally, take a look at these two resources — they can help you get started: FINRED’s spending plan worksheet and the Creating a Spending Plan microlearning video. Whatever tool or system you use, it is better than no system at all. If you don’t have a plan and a way to monitor it, you will probably not improve your finances.

I’m just glad we don’t have to use the paper and pencil system anymore because I can’t remember where our 37 year-old electronic calculator is.

Follow the Department of Defense Office of Financial Readiness, or FINRED, on Facebook, Twitter and Instagram for more financial planning tips. Look for more on YouTube and the FINRED blog.

Written by Dave, an Accredited Financial Counselor® who has been helping families plan their finances for more than 30 years.