This week we want to introduce the topic of Money Management, specifically creating and sticking to a monthly budget. We had put this on our list of topics to cover this year and thought we would go ahead and talk about it this week since there were a couple of questions about using an Envelope System last week.Now, there are a ton of great books and websites out there that explain the virtues of budgeting and provide great how-tos - I'm not looking to reinvent the wheel here or anything. But I do want to point you all in the right direction if you are looking for some ideas in this area.
Want to go to the two big names in Christian Personal Finance? Check out Crown Financial or Dave Ramsey. Maybe your church offers classes by one of these. Or maybe they have some of their literature in your church library.
Want to read a great, straight-forward article on creating a budget? Read here. The article is probably the best introduction to the topic.
As far as money management, here are the big three that I've seen people use:
1. Quicken (or something similar, like Microsoft Money). My parents are avid Quicken users. They use credit cards, debit cards, and cash to pay for things. My dad turns in all of his receipts to my mom, the keeper of Quicken. She records all of their transactions every few days. It is actually quite comical to watch my dad try to tell my mom where his cash went (down to the penny) when he doesn't zero out after my mom enters the receipts. And I once watched my mom fret for a good hour because she was off by 2 cents and couldn't figure out what was wrong until she finally remembered that she had given Samuel 2 pennies to throw into the fountain at the mall! (And she actually entered that into Quicken under "gifts"!). Quicken is a great tool for those who like to track things, who use the computer a lot, and for those that are good at keeping receipts. You can read Quicken's quick thoughts on creating a budget here.
2. The Cash Envelope System. At the beginning of each month, you withdraw the amount of cash you have allotted to your monthly budget. You separate this cash into envelopes marked with your various budget categories. As you spend throughout the month, you draw from the appropriate envelope. When the cash is gone, that's it - no more spending in that category for the month. Want to read more about this? Check out a great run-down of this system here. And be sure to look for more posts this week on how a few of the POH authors use the Envelope System in their household. Oh, and there is something by Crown Financial Ministries call Mvelopes, which is apparently a sort of Cashless Envelope System. Read here for more info.
3. Budgeting with ING Direct. ING Direct is a full service on-line bank. They have a great interest rate and great services. You are able to set up automatic bill-pay, pay bills on-line, sub-divide your account into many different categories, and set up automatic distribution of your paycheck, etc. You can read all about it here.
Have a great budgeting system that works for you? Feel free to e-mail me at leahpayne at hotmail dot com to share your story and have it posted on POH. Or leave a comment telling us what you use and why.
4 comments:
For people who want to use Quicken or similar software, but who aren't great at keeping up with receipts--we use a combination of a Microsoft Excel workbook that I created and envelopes. Any money in the bank is in Excel, in its proper category. Any money that comes out in cash goes into an envelope. We aren't good at saving receipts, but we don't use credit cards, and checks we write out at home--if we're out, we use cash, and for certain planned purchases, the debit card. So we check our bank account daily to record our debit card transactions in the appropriate category in the Excel workbook, record when cash comes out (and put it in its envelope and spend it without worrying about receipts), and record our checks when we write them. No receipts to keep up with, but we stay on track with our budget. Just wanted to point out that it doesn't have to be Quicken OR envelopes; a combination works well for us.
I'm Leah's mom and even I laughed at her telling the story of the two cents to Samuel. We have been using Quicken faithfully since 1996. Just thought I should point out that you don't have to use the cash account feature in Quicken. Especially for people who use credit cards or debit cards for most purchases. You can just have a category for "cash". For example, if you regularly take $20 out of the ATM each week for pocket change you could just show that $20 each week as an expense and not keep track of how you spent it. This is what we used to do. But a few years ago we discovered that the cash expense had gotten quite large and we wanted to know what we were spending it on. I'm much more precise about balancing my cash account than my husband is. But I'm kind of a detailed person. So this method works great for me. Anyway, I really want to say how much I love Quicken. It's the best way I know to keep your checkbook balance. I like this much better than the paper register. But most important is to find a method that you like, that works for you, and stick with it.
I have a mac now but I used mvelopes when I had a PC. It was great but I didn't like the fact that I had to pay every month to keep up with a budget. Once I got my mac, I searched for some kind of budgeting software for macs and came across "Budget" by Snowmint Creative. You can google that to find the software. It isn't free but I think it only cost me 2 months of subscribing to mvelopes to buy it. I LOVE IT! It is exactly like mvelopes except it doesn't automatically download your transactions, you just manually enter them. You have to do this in mvelopes as well in order to match your transactions. This past month, they came out with an iPhone/iTouch application so you can keep up with it on the go. I didn't think I could love a software program more than what I did but I definitely do! I don't have the excuse of forgetting about it by the time I get home. I just enter my receipts before I leave the parking lot or restaurant. When you get paid, you just tell it so and it will automatically distribute the money however you want to do it. It also has a "fun" side- you can choose various colors for your envelopes and they have cute little icons you can have displayed on your envelopes. Anyway, I am not blasting mvelopes because it is great and I love it too. Our budget was just so tight I couldn't justify paying month after month for the service. If you are like this, and own a mac, you should try this software.
We have done Dave Ramsey for over a year now. We have LOVED using his system. I don't want to share yet how exactly much we've paid and saved, but I will say that so far we've paid off 2/3 of our debt. We are in a much better place now financially than we've ever been!
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