For many people, the task of creating a household budget can feel daunting. However, the biggest challenge is to maintain it. If you don’t track your budget, then what is the point?
A budget is your financial roadmap. It provides direction on how to spend your money. It is no different from any other plan. For example, if you’re trying to lose weight, how else would you know if you are making progress unless you weigh yourself? The scale is your tracking tool.
Despite what some may think, the household budget or monthly cash flow plan is the most important building block in your financial plan. Therefore, it is vital that it be tracked for progress. Income and expenses must be tracked and be measured against the categories you have budgeted. How else would you know if you are overspending (or underspending) in a given area of your budget?
There are several tools and approaches to track and check a budget. Technology has made this very simple to do. But first, I recommend that you choose a method. It does not have to be electronic, it can be paper based (especially for those not skilled with computers or smart phones). If you are going electronic, which I do, I recommend using one (or both) of the following tools:
- Everydollar: This is a web-based budgeting software developed by Dave Ramsey. It is very simple to use especially when it comes to creating your budget. If you have an iPhone, you can download an app to view your budget and enter expenses. I do not use this tool to track but I use it to create my monthly budget.
- YNAB (You Need a Budget): This is my preference for tracking because I like the way unused categories transfer over to the next month especially for savings or sinking funds. However, unless you are computer software savvy, it is not the easiest tool to use. I transfer the budget from Everydollar into YNAB then use this tool for tracking. You can download an app for this tool as well.
Once you pick a tool, then you need to decide how often and when you will track your budget. What is the point of using fancy software if you are not going to track your progress?
My wife and I have budgeted for at least six years. We put together a budget for each month, agree to it, then put into use when that given month begins. We are very good at it; it literally takes less than ten minutes. However, I still track it very closely. In fact, I check it every other day. I treat it like a business (Jacobs Inc.). If you are new to budgeting, I recommend starting out by tracking everyday.
Creating a budget may seem to many as the biggest challenge in the budgeting process, but actually, tracking and sticking to it is the hardest part. Tracking is the accountability tool in your financial plan. As the late Zig Ziglar said, “If you aim at nothing, you will hit it every time.
Question: If you are tracking your budget, what tool are you using?