Choosing a System

After you've tracked your spending for a month, (or maybe while you're still doing that initial tracking) you'll want to investigate your options for a budgeting system.

One of your first choices is whether to go with a paper-based or computer-based system. If you are just beginning the budget journey, the best way might be to go with the traditional envelope system. I personally don't do it because it is cash-only and most of our bills are set up for automatic payments, we both have direct deposit, etc, while it would be possible to go cash-only it would involve re-arranging things we already have in place. Envelope-based systems have been around for a long time, and they've been around so long because they work.

There are advantages and disadvantages to either method. Computer-based budget tools (like the You Need A Budget www.youneedabudget.com that Cheryl uses, Microsoft Money, Quicken, or mVelopes www.mvelopes.com ) are cool because after they're set up, they do alot of the "work" for you. They will automatically add and subtract. Some will import your bank information. You can make charts and graphs. The disadvantages are that you have to be at a computer to do them, and some of the programs have more stuff than you really need.

Paper-based budgeting programs include anything from you setting up your own little chart, to BudgetMap www.budgetmap.com which is what I use. The biggest advantage is that paper-based systems are more portable. The disadvantage? You'll have to do your own math, and if you want a pie chart of your spending, you'd better go find some crayons!

Taking some time to look over various systems is a good idea, or ask for suggestions. When I first started using BudgetMap, I couldn't *bring myself* to fork over the money for the real ones they sell, because they are kind of expensive (IMHO). Instead, I snooped around the website until I figured out how it was set up, then made my own in Word. I used those first, for a little while, until I knew the system worked for me, then I ordered the real ones. Your computer might have come with Money or Quicken, at least an intro version, check it out. mVelopes has a free trial period.

BudgetMap categorizes your spending and puts category into it's own column. When you make a debit, you decide which category it comes from, and deduct the amount. You always have a running total of how much money is left in each category. Deposits are written in and distributed in whatever way you've figured out. The website takes you step-by-step thru setting it up, plus when you order it they send a small booklet of the same information. The BudgetMap itself is the size of a checkbook register, which means you have it with you all the time and can see before you make a purchase if there is money left in the category.

You Need A Budget (YNAB) uses a very interesting idea, one that does make me want to investigate it further. Their premise is that you get the budget set up so that you are spending last month's income. You adjust your categories to reflect that income, assign every dollar to a category, and you've got a month's padding in there. I'm sure your first thought is "how am I supposed to budget last month's income when I already spent it?", but they explain how to slowly build up your reserves. You are no longer living paycheck to paycheck.

And of course, that's just the beginning. There are so many systems out there. Take some time to look around and find one you think will fit!

Don't get too bogged down in the decision-making, though. Some people have everything set up in a spiral notebook, the important thing is to get the ball rolling.