How To BudgetLearning how to budget is easier than ever. With the personal finance technology that has come out in the past few years, it takes less time to budget than it does to not have a budget and figure out where your money went. The days of reconciling transactions and looking over bank statements are over and you don’t even have to mess with boring spreadsheets.

If you need a little background on what a budget is first, visit my article titled What Is Budgeting and then come right back.

Starting a Budget

The first thing you need to do is to decide how you’re going to create your budget. There are spreadsheet templates and quite a few software packages out there. For those that would like to use a spreadsheet, you can click here to download a really powerful Excel workbook I built for myself and my friends in 2009. Some Excel skills will be required to tailor it for your own needs. It’s totally free.

These days, what I recommend and use myself is one of the free online budgeting tools. Best of all is to find a service that has a free app for your phone, like LearnVest and Mint.com. This way you are always in touch with your budget and don’t have to spend time on your computer once you set things up.

There are several great options out there, so find the one that works best for you or your family and get registered. I also want to mention that I do not receive money from any of these services, so any mention I make is purely to help you.

As for security concerns, websites like LearnVest and Mint.com cannot perform transactions or transfers to your accounts, nor do they possess expiration dates or the numbers on the back of your credit cards. You should research and consider any risks, but the read-only and encrypted environment is fine for me.

How Not To Budget

There are people who “manage their finances” by keeping an eye on their checking account balance. I know this, because this is how I used to track my spending when I was in my early 20’s. The problem is that no matter how much money I had, I would lose track and forget checks that I wrote, which resulted in fees and not really knowing where my money went.

My wife used this method to track her finances when we were still dating, but, as you might have guessed, she is now an expert budgeter too. You can actually read our story on Mint.com’s blog. It’s especially funny if you share, or are soon going to share, a bank account with your significant other.

The Value Priority

If you ask most experts how to create a budget, most of them will you to make a list of your fixed and variable expenses and to leave a little for savings. Fixed expenses are things like your rent or mortgage, car payments… anything that is fixed in amount. Variable expenses vary, such as grocery bills, clothes shopping, travel and that sort of thing.

But this is another area where my strategy is very different from most experts and I call it the Value Priority. Using the Value Priority method, the first exercise you do to start a budget is to make a list of the things you value the most in the world and, without knowing it, you will have just created the outline for your budget.

This may not always come easy for people. You need to really clear your mind and decide what things you value the most. Do you spend more on books or clothing? Or maybe you don’t care about concerts and entertainment, but love having friends over for dinners. I talk about this in great detail in my book.

The point is that your money goes to the things you value the most in life, whatever they realistically are, and that you reduce or cut those expenses that you don’t truly value. Using the Value Priority method, you will become happier, less stressed and feel a sense of fulfillment that standard budgeting methods will not provide.

Start Your Budget

It’s time for you to get started. Decide which budgeting method is best for you and get your information loaded up. I would love to hear which method you choose too, so let me know on my Twitter or Facebook pages. My next article will give you loads of new budgeting secrets and the quickest ways to connect with your goals.

Photo Credit: 83633410@N07

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