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Build a Dead-Simple Budget with a Shoebox
Posted by Kevin Purdy at 11:50 PM on April 25, 2008
The Simple Dollar personal finance blog delves into household budgeting—something more of us should do, but are kept away from by fear of spreadsheets, math, and undue time commitments. Blogger Trent's solution is simple and reliable, however, and takes only a willingness to collect paper and toss it in a shoe box. Collect one to three months' worth of receipts, checks, pay stubs, and other paper records of money in and out, drop them on a floor when you're done, and then arrange them however you'd like:
You'll probably find yourself shifting piles around and making new piles throughout this process, as you should. The goal is to find ways to group your spending that's natural to you. Don't try to force it to match someone else's groupings - if a group of receipts or statements feel like a natural group to you, that's how they should be sorted.
Divide each pile by the number of months you've been saving, and you'll have some hard and fast numbers to work with. Sure beats trying to figure out where a hamburger and coke splurge fits into a ledger. Hit the link for a fuller explanation of a simple budget you can use to plan your spending.
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Deprong Mori
Posted 12:31 AM 26/4/08
That might work if your finances are all on deadtrees. For the past several years, the bulk of my transactions have moved to fully electronic transactions and I try to get electronic statements whenever possible (credit cards, credit unions, brokerage).
You're better off using an electronic tool (Quicken, Excel, MS Money, reputable online site, etc.) to create your budget.
Oh, keep the receipts, but it's possible that the bulk of your spending is going into items that are primarily electronic transactions (taxes, housing, food, gas, utilities, insurance, healthcare).
Deprong Mori
dognose
Posted 1:21 AM 26/4/08
I personally hate all these "budgeting" options. It all comes down to having the self control to only spend what you need.
dognose
OX4
Posted 4:55 AM 26/4/08
The other cool thing about MS Money (and I assume Quicken) is you can split transactions. If I buy cat litter, windshield wipers, and milk at Sprawl-Mart, which shoebox does the receipt go in?
OX4
Deprong Mori
Posted 6:50 AM 26/4/08
@OX4: Yeah, Quicken has the same functionality and I do the same thing as you.
I also split transactions a lot when I pull out cash which goes to different, mostly cash-only places (taqueria, noodle shop, mom-and-pop cafes, a lot of SF bars, farmers' market, etc.), but I don't micromanage down to the last cent.
The split transactions work great for salary deposits (401k contribution goes into that account).
Deprong Mori
phoenix
Posted 1:03 PM 26/4/08
@Deprong Mori: Agreed, agreed, agreed. Go electronic when possible, print paper when you need to keep statements and such, keep electronic copies of statements in PDF or encrypted or whatever for easy access.
It's so much better to keep your finances electronic than in massive filing cabinets if you can - and I know a lot of people either can't or won't, and that's totally cool! - it's been a lifesaver (and fewer trips to the recycling bin with shredded paper) for me.
@dognose: It's not that simple, epsecially for someone with serious expenses. Budgeting isn't just about making sure you have the money for the things you need and save some for the things you want, it's about knowing where your money is going, how fast it's leaving you, your current financial situation at any time, and your projected financial situation at any time in the future. Having self control is only a small part of the equation when it comes to being financially aware and healthy, and budgeting does more to help you get there than making sure you don't supersize your fries when you need to pay the rent.
phoenix