Budgeting in the News

Single mom and personal finance blogger Kumiko Love, aka “The Budget Mom,” came up with a novel budgeting method that was featured on GMA. She calls it the “Budget by Paycheck Method.” She reportedly used this method to pay off $77K of debt in 3 years. Her method is actually s a combination of the paycheck method, the calendar method, and the cash envelope method. Seems to me that this method is great for those that like to see everything spread out in front of them. Variable spending is based on cash, which limits the tendency to overspend by using plastic. I know whenever I faced financially tight times, I went back to using cash for all non-fixed expenses. When the money was gone, the spending had to stop until the next paycheck.

Ms. Love has a video that walks you through her method (19 minutes long), and you can purchase her printable worksheets to create your own tracking workbook (links are in the GMA wrte-up). NBC covered this same story with more text but no video.  The budget process starts with tracking expenses but generates a complete financial plan (minus where/how the savings are invested.)

We next give equal time to dads and their advice. Here is a budgeting article from Fatherly. “Bank of Dad” dad Daniel Kurt consulted with financial advisor Frankie Corrado from Holmdel, NJ to come up with these budgeting guidelines for his readers.

1) Pay your future self first. 10-20% of income straight to a 401k or similar account

2) Focus on the big picture. He likes using Mint to get a handle on spending, not to worry about individual expenses but to look at the larger picture and then look where to cut.

3) Pace yourself. Work you way (down) to your target spending levels.

4) Know what you are aiming for. Car? House? Vacation? Early retirement?

If it seems overwhelming to write down all of your expenses and keep and track against a budget, behavioral finance tells us that doing so will actually change your spending decisions. Business Insider relates the story of a couple making $100,000 with kids and debt, living paycheck to paycheck and unable to make a break out of the pattern…..until they took a stab at budgeting. Creating a budget and naming their savings goals gave them the incentive to examine their spending closely and save money wherever possible.

Budgeting Pitfalls

This graphic explaining why budgets fail was brought to my attention by fellow FinLit Fanatic Nils Wikman.

Money Under 30has a list of best money apps for folks under 30, some of which are discussed below. However, a related article on their site, No More Budgets, guides you through four steps to manage your money without an actual budget.

You create a simple spending plan, and they suggest you use only one credit or debit card, making it easier to “track” your spending. You start with your monthly “nut” or fixed expenses. Included in this would be your debt payments and savings goals (monthly) in addition to your rent, utilities, insurance, and the like. Subtract your “nut” from your take-home pay, and feel free to spend what is left on everything else. This is your allowance. Just like when you were a kid, when it is gone, it’s gone.

The only issue is keeping track of how much of it you are spending if you are using plastic instead of cash. You can use one of the free apps to track your spending, or if you are using a single debit or credit card, just track your balance. Another suggestions is that you automate as many payments as possible. Need more spending money? Need to save more? Look for major money savers or life changers (like getting a roommate) before you worry about skipping the coffee or cutting back on your groceries.

(In my opinion, this addresses almost every reason why budgets fail, except perhaps number 7. If you add some automatic payment systems for everything in your “nut,” you, you could be set.)

Budgeting Apps

Mint is well known and seems to be the gold standard against which other apps are measured. It shows up in every “best app” list I’ve come across. Once you set it up (an easier process for those starting out) and sync all of your accounts, the app becomes your one-stop shop for all things financial---budgeting, paying bills, saving money, setting and tracking financial goals, and monitoring your credit score. It alerts you when you have a low balance, when you have overspent in a budget category (which you can customize), or when bills are due. You can use Mint to pay your bills and automate everything (and avoid the alerts.) It uses two-factor authentication as well as a password and is considered to be a very secure platform. You can load it on any phone or on your computer.

One downside to Mint is, because all transactions are categorized automatically, users are not as likely to track their spending against budget by category in real time. You don’t look at an expense and decide where it should go against your budget. Komando.com offers an in-depth look at Mint.

Empower Finance sounds a lot like an alternative to Mint. It will help with budgeting, aggregate your accounts, and it recently added the capability to set up automatic savings. It is free and pays decent interest.

Expense tracking is critical in establishing a budget, and it the most cumbersome part. Wally is a free expense tracking app that makes this part easy. At this point, it is only available to iPhone users. You use your phone to snap pictures of receipts and the app does the rest, giving you a good picture of your spending, and tracking it against your income, budget, and savings goals.

Digit and Joy are apps whose goal is to help you save more on a dynamic basis, adjusting frequently during the month. It is indirectly a budgeting app in that your regular fixed expenses must be entered for it to know what your disposable funds are at any given time. These were discussed recently in “What’s New With Savings?”

You Need a Budget is targeted at people who need to get a handle on their debt and break the paycheck-to-paycheck cycle. It costs $7/month, but offers lots of support and education.   This may not be a starting point for students, but good to know for more established folks who need to gain control of their spending and debt. It is based on zero-sum budgeting (every dollar has a job), and sounds a lot like a digital version of Kumiko Love’s “Budget by Paycheck” method described earlier.

Apps to help you contain your expenses

Need an app to manage all of your subscriptions? This article from Wired, described an app called DoNotPay that manages your “free trials” so that you never have to give a real credit card or email, much less end up paying for a subscription service after the free trial period. This is only available for iPhone users.

We talk about the gig economy. Parallel to this on the consumer side is the subscription economy, from digital subscriptions for entertainment to food and beverage deliveries to clothing rental and purchase. Truebill is an app mentioned in a Columbus Dispatch article discussing the subscription economy that helps you manage your subscriptions. Trim is another one aimed at keeping subscriptions under control.

Bottom line (pun intended), not every budget system or app will work for everybody. Perhaps these articles will give you some ideas to augment your usual budget lessons. But some form of spending plan is essential.  To help convey that to your students, check out today’s Teacher Tip from NGPF Fellow Amanda Volz on Living Paycheck to Paycheck.

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