How to Track and Implement a Budget
Budgeting Program
Using a budgeting program (an app, online website, software, etc) is a great way to develop and implement a budget. Here are the two general flavors.
Aggregation Tools
I love aggregation tools because it makes managing a budget so much faster. The less work you have to put into just getting the data, the more likely you are to stick with it. Aggregation software automatically pulls in transactions from your banks, credit cards, and other accounts; performs some basic categorization for you; tracks your progress in the budget; alerts you to overspending; and can provide some useful graphics to help you visualize your spending. This takes a lot of the leg work out of budgeting and allows you to spend more of your budgeting time confirming the information and assessing your situation.
Aggregation software can be fully online, in a spreadsheet, or on a desktop application.
Non-Aggregation Tools
Some of the budgeting tools you’ll come across either not provide aggregation or require an up-charge to get it. Or you could just be using a spreadsheet. Again, these tools are good but I prefer ones with Aggregation.
Pen and Paper
As simple as it sounds, just writing everything out in a notebook or piece of paper and track it monthly. Operating your budget this way will add more time to each budget time estimate above because you have write in every transaction, add up the category ongoing totals, and repeat that every month.
But, if that is how you are most comfortable budgeting and it gets you started, go for it!
Cash Envelope
The idea of this budget is that you allocate cash to envelopes (yes, physical cash to physical envelopes). You can only spend money in the envelopes for that category. Once the envelope is empty, you can no longer spend in that category. The great part of this technique is it is very tangible, and you can see the dollars go throughout the month. While some advocate doing this entirely, it could be a very useful tool implemented in difficult to control budget areas. For example, if you want to cut back on buying coffee out, you could use an envelope system for your coffee budget. Once the cash is out, no more coffee out.
It is important to note that the cash envelope method style is also available using a budgeting program which can give you the benefits of this method while automating the rest.