Personal Budgeting methods and tools

A good budget reduces the stress that occurs when your finances are disorganised.

There are many ways a personal budget can be organised. The challenge is to find a way that suits both your personality and lifestyle.

Let’s look at some of the more common methods of budgeting:

1. A budget plan.

These budgets use a sheet or spreadsheet to give an overall picture of what your income and expenses are expected to be. All your income and expenses for the year are listed out the numbers at the bottom of the page show if you are spending more or less than your income.

A good way of thinking of these budget plans is as a photograph or snapshot. They tell of your situation at a point in time. Budget plans have to be rewritten whenever there is a change or unexpected expense.

Banks use these budget plans as part of the approval process for a loan application.

Some people find a budget plan is sufficient planning for them. Many other people find that they become frustrated with having to constantly rewrite their budget.

2. Envelope Budgeting.

Many of your expenses require you to save so that the money is ready when the bill comes along. Using envelopes, bottles or tins has been a traditional method of doing this. Each pay you take the money and put it in different envelopes for each of the bills you have coming up. When the bill comes along you have the money ready to pay it. If an unexpected bill comes along you shuffle the money between the envelopes and keep going.

This method of budgeting has declined in its popularity as fewer and fewer people are paid in cash and more and more bills are paid electronically.

3. Budget Calculators.

Budget calculators range from simple forms through to highly complex spreadsheets that can break down your income and spending to whatever level of detail you require.

Budget Calculators give you the advantage of being able to balance and reconcile a budget. The downside is that you are constantly re-entering information. You can build your own budget calculator using a spreadsheet or choose from the many free and low cost solutions on the web.

4. Accounting Programs.

There is any number of accounting programs available that can help with budgeting. These programs are designed mainly to give accurate records of where your money has gone. The result of this is that they are complex and difficult to use.

5. Dedicated Budgeting Programs

A dedicated budgeting program is designed to look forward and determine if you will have enough money to enjoy your lifestyle till the next pay and beyond. These programs simplify the way you sort your money.

A dedicated budgeting program should automatically calculate when your bills will become due and how much you will need to put in a "Bill Account" at the bank so you can pay them.

Here's a simple test to see if you could benefit from using a budgeting program. Are you able to guarantee that you will keep up to date with your budget?

If the answer is yes then you can use any type of budgeting plan or program that you wish. If the answer is no or possibly then you could consider using a budgeting program that allows you to restart your budget at any time without spending hours rebuilding the entire exercise.

A personal budget is essential if you want to be able to enjoy a lifestyle that suits both you personality and lifestyle.

The key to choosing a Personal Budget is to find a solution that you can work with over an extended period of time.