Money Mentor's Wealth Project

Tips and Tricks to help you budget, save money, and build wealth

Three Simple Budgets Methods That Work!

Three Simple Budgets That Work!

 Budgeting to save money is a discipline – not a secret. But to succeed, you need to find a method that works for you. The key is to keep it simple and have realistic goals – slow and steady wins the race. Don’t try to budget the way that most people try to diet because most diets don’ work in the long run when they are not realistic. The good news is saving money is much easier then shedding pounds.

 Before you start, figure out how much you should budget for each category (ex. housing, food, entertainment, etc.). The easiest way to do this is by using the prefilled budget in the Wealth Project App. This will tell what is reasonable based on your income, rent, and your life-stage.

 Here are three effective (but overlook) methods:

  1. The “Envelope System”

This old-school method is super easy and very low-tech. Start by getting a separate envelope for each category of spending (ex. housing, food, entertainment, etc.). After each paycheck, fill each envelope with the amount that you budgeted for that period.

 For example, if your rent is $900 add that to the envelope and don’t touch it until the rent is due.

 Start with you basic needs first (rent, food, etc.) then tackle your discretionary spending (ex. entertainment, clothes, etc.). Don’t forget to add an envelope for savings. You savings target should be based on a goal (ex. paying-off a credit card, saving for a car, etc.). To help you set a savings goal, go to the Wealth Project App [http://www.mymoneymentor.org/wealthproject/WealthProject.aspx]. In less than 5 minutes, you can setup your budget, select your savings goals, and get a plan of action items in place so you can succeed.

 For more detail on the envelope system see http://www.moneycrashers.com/envelope-budgeting-system.

 2. The “Pre-Paid Card Method”

This is a modern twist on the envelope system. Instead of paper – use plastic (pre-paid cards). You can buy a refillable card for each budget category based on the amount you want to spend for that month. Almost every major retailer (including grocery stores) have gift cards. For items that don’t have gift card available (like rent), use a prepaid debit card (ex. Visa) or combine this method with the envelope system.

 BONUS: Some cards provide cash-back based on your spending. For example, Walmart Money Cards will give you anywhere from 1% to 3% back on your purchases.

 Be aware that some cards require a purchase fee so read the fine-print. See http://www.moneycrashers.com/use-reloadable-prepaid-cards-budgeting for more details about this budget.

 3. The “High-Tech Budget System”

There are way too many on-line tools and apps that help you manage your budget. Some, like Quicken and Mint.com will actually track your spending so you can get a handle on your spend trends before it’s too late.

 Here’s a list of some popular tools:

  • Yodlee
  • Mint
  • YNAB (You Need a Budget)
  • Mvelops

 Regardless of the method you use, the most important thing is to keep it simple and set realistic goals. Get started by going to Wealth Project App to figure-out what’s reasonable to spend in each category based on you income and age (Step #3 – click ‘Enter Your Expense Details’).

 TIP: If you have used the Wealth Project App in the past, you can skip the first page and go directly to #3 “Your Savings & Expenses”. The app remembers your input from the last time you used it if you are accessing from the same device as before.

 TIP: Make sure to save money for an emergency. This should be your first priority for saving.

 

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