The 5 Methods of Budgeting
December 2004 - eNewsletter

Below are the five methods of budgeting. For most people their budget will consist of at least two of these methods working together.

1. Create Separate Bank Accounts - Have your check divided into four different checking/savings accounts:

a. First, a giving account for your desired charitable contributions.

b. Second, a savings account where you can direct a certain amount to meet long and short term savings goals.

c. Third, a bills account that would include funds for mortgage, utilities, phone, auto gas and any other regular or “fixed” expenses.

d. Fourth, a living expenses account from which you will fund expenses that you can control such as eating out, clothes, etc.

The benefit of using separate accounts is that you make sure giving, savings and bill priorities are met first. Then you can freely utilize the money in your spending account as long as you do not go below zero.

2. Use Cash - The beauty of this technique is there is no record keeping! While it is not practical to use cash for all your categories, you can use it for those categories that are spending problem areas such as eating out, entertainment, etc. With cash, you have no record keeping and you have instant accountability. If the envelope, cookie jar or whatever you use to hold the cash is empty, then you are done for the month and any additional spending will be on purpose, not in ignorance.

3. Use a Written Budget - Many people like to use written ledger sheets on which they simply manually record their expenses and then add everything up. While you can do this yourself, Crown Ministries has a workbook entitled "Family Financial Workbook" with all the forms already laid out.

4. Develop Your Own Spreadsheet - A modification of the written ledger is developing your own spreadsheet using Excel or another program. Whether or not this will work for you comes back to whether or not you will invest the time to enter your expenses into the spreadsheet regularly.

5. Use a Budgeting Software Program - For some, this can be the most efficient method but also somewhat time consuming as a regular updates and maintenance is required. There are numerous financial programs and websites available and you need to find the one that works best for you. Some of them include: www.quicken.com, www.microsoftmoney.com, and www.mvelopes.com (a web based program).

By being honest with yourself and realistic, as opposed to idealistic, you can find the system that will best work for you. Make sure to put the time needed for whatever system you choose into your schedule so you can stay on track. Here are two great litmus test questions to find out if you need help tracking your budget:

o You want to go out to eat tonight and you have already eaten out several times this month - Do you know if you still have budget funds and how quickly can you find out?
o You are prompted to make a charitable contribution but how do you know how much you have to give?

The system or process that will work best for you is the one that will allow you to quickly answer these questions with an affirmative “yes” while helping accomplish your financial goals. Begin the new year right by purposefully seeking to be a more effective steward of your resources. An organized budget and an effective budget tracking system can help you in your stewardship journey.

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