The word "budget" means different things to different people. To the financially undisciplined and inexperienced, it is synonymous with unbearable constriction and rigidity. But often during times of economic downturn, conditions force this necessity upon many consumers who were previously able to get by without one. Of course, for the sophisticated, a budget is a finely-honed tool that can be used to accomplish a number of short- and long-term financial objectives. However, there are several different types of budgets that can work for different types of people.
There are several styles of budgets that are geared for those of us who are less efficient and organized. Not everyone is adept at using Microsoft Money or Quicken in everyday finances, and those in this category can become discouraged when they try to integrate modern technology into the spontaneity of their financial lives. The following are a few alternative budget strategies for those who can't stick to a traditional budget. You might have to try a few different approaches to find out which one works best for you.
The Bucket List
This kind of budget requires two separate checking accounts, along with a high-yield savings or money market account. Then you must determine how much money you want to set aside in savings each month and adjust your direct deposit from your paycheck so that the amount is automatically funneled into the savings account. From there, you will need to direct this money into various long-term savings vehicles, such as a Roth IRA, college savings plan or other long-term investment. Then deposit the remainder of your paycheck into the first checking account. Set up automatic bill payment for this account and pay all of your monthly bills out of this account. Now add up the total bills that will be paid out of this income and determine the remaining average balance.
Arrange with your bank to have a quarter of this remaining balance deposited into your second checking account each week. This money will be used for variable expenses, such as groceries and entertainment.
This budget is difficult to combine with credit card use and it also forces you to adhere to the limit of money available for variable expenses on a weekly basis. But it also frees you from micromanagement and essentially functions on its own, without you having to make regular conscious decisions. (Also, read Cut Your Bank Fees to learn about ways to trim bank costs.)
Back to Boot Camp
Consumers who can focus intensively on a topic for a short period of time may find this type of budget appealing. Starting on Friday night or Saturday morning, gather together the last three months of all of your bank and financial statements. Total all of your regular monthly expenses and list them out on a sheet. Now it's time to make some painful decisions; you'll need to simply eliminate one or more of the expenses on your sheet, such as your country club dues, weekend entertainment or even one of your cars. Although this approach will have an adverse impact on your current standard of living, the money you save will enable you to live further within your means without having to adhere to a strict monthly budget, per se. Perhaps the main advantage of this method is simply that it doesn't require constant attention, and is probably best suited for consumers with short attention spans.
Stick It to Yourself
If all else fails, you may need to get a partner to hold you accountable. By penalizing yourself financially every time you don't stick to your budget, you will gain the (much-needed) assistance you require – think of this method like a "swear jar" for your finances. But don't stop at mere verbal or interpersonal accountability. There are many resources available to help you adhere to your newfound spending restrictions, including http://www.stickk.com/. This particular website employs a system of small fines that are used as a form of financial punishment for contract holders who fail to meet their obligations. The website contract outlines the objectives and terms of the budget, and also requires periodic checkups. If one of the checkups reveals that you have failed to adhere to your budget, a fine will automatically be debited from your bank account to a pre-determined location – a friend, family member, charity or additional savings account.
If you really need some extra motivation, consider sending the payments to a party with whom you strongly dislike or disagree, such as a rival political party, corporation or organization that stands for something you abhor. The idea of paying your hard-earned cash to this entity if you don't stay within your budget may be just the thing to stoke your resolve.
You can still have an effective budget, even if you're not into computer programs or physical envelopes. Try one or more of the alternative methods described above and see how it works. Don't get discouraged if the first method you try doesn't yield the results you need. (For more information on budgets, see our article Top 5 Budgeting Questions Answered or consult your financial advisor.)