There are many ways to reduce costs in our every day lives, so to help do just that each Monday I will post a money saving “Tip of the Week”.

“And he said unto him, Well, thou good servant: because thou hast been faithful in a very little, have thou authority over ten cities.” Luke 19:17

This weeks tip involves…keeping a budget!

One of the single best pieces of financial advice you could ever receive is simply to keep a budget.  This is far from new information, but is something that bears repeating over & over & over again until it is adopted!  In Philippians 3:2 Paul says, “Finally, my brethren, rejoice in the Lord. To write the same things to you, to me indeed is not grievous, but for you it is safe.” I too am saying it is not grievous for me to mention your need to budget your money, and indeed for you it is safe.

There are several approaches you can take to budgeting:

1. Manual – use a pen & paper to create a physical copy of your family budget. You do not see this option mentioned on a lot of modern finance blogs and may think of it as “out-of-date” or “unstylish”…however…despite all that modern technology has to offer, this can be one of the most effective forms of budgeting available even today; it all depends on your specific situation.
2. Spreadsheets – use MS Excel…even better…the free OpenOffice Calc or Google Docs Spreadsheet. This is an option a lot of people prefer due to the control you have, the privacy you have, and the flexibility you have.  A draw back of this option is that it can be both time consuming and tedious to set up the spreadsheet, especially if you are not versed in the use of spreadsheets.  There are many good free templates out there, but again…if you are not a seasoned spreadsheet user, this can be a tough road to hoe.
3. Online tools – Using a piece of software built for the purpose of budgeting. There are both free & pay options available.  Some of the best free tools include Mint & Wesabe.  Two fee based software packages that are not free but are very effective budgeting tools  are YNAB (YouNeedABudget) and Mvelopes.  I am actually in the process of reviewing both of these and will be posting my results  soon.

What do I use to budget?  Currently I am using a combination of all three methods.

Because my wife has a serious aversion to computers & technology, we use a Moleskin journal to record our family budget.  The journal is used as a simple & quick overview for our income & expenses.  We do not go into detail here, but simply list the basic monthly debits & credits of our money.

The one technology interaction I request my wife does participate in is Mint.com.  We both have separate Mint accounts and use them to help us budget and keep track of our spending & individual transactions.  Keeping track of this information in a handwritten journal is both time consuming & impractical when free tools such as Mint.com exist.  Another benefit Mint provides us is the ability to view spending trends which enables us to visualize & identify problem areas, then develop a plan to curb them accordingly.

As I mentioned above I am currently in the process of downloading, installing, using & reviewing both YNAB & Mvelopes software budgeting tools.  Both of these softwares come highly touted and offer free trials, of which I am taking full advantage.  YNAB provides a 60-day free trial and Mvelopes offers a 30 day free trial.  Some differences between the two include but are not limited to the following:

• Software type – YNAB is a software you purchase once & install on your PC whereas Mvelopes is a web & fee based subscription service.
• Data importing – Mvelopes automatically downloads & imports your banking information for you while YNAB requires you to manually import the data.
• Acessibility – YNAB is only accessible from the computer you install it on, but is more secure in that wise.  Mvelopes is accessible anywhere you have an Internet connection and browser therefore making it susceptable to security hacks and is also unusable if the Internet connection goes down, but if all is well gives you the ability to view your information from any Internet device.
• Cost – YNAB is a one time purchase whereas you must pay for Mvelopes every month you use it indefinitely.

What do you think?  How do you budget & which methods mentioned above do you use?  Like I said, I am currently using all three & hope to narrow it down here in the near future.  Please share any experience you have for the benefit of all readers.

Click here to see all our past DFA Tips of the Week.