Three mason jars
Give. Save. Spend. Three jars sit on my six-year old’s bookshelf, one for each of those words. It's just one of the ways my wife and I are teaching our children to manage money.
You know that setting up a household budget is something that you need to do. Doing so can help you prepare for your retirement, pay for your children's college educations and make sure that you do not run up high-interest-rate credit card debt.
Unfortunately, budgeting is also something few people like to do. It takes time and it requires organizational skills. That is something that many of us lack, or at least think we lack.
However, here's the good news: Creating a budget does not have to be difficult. In fact, there are three simple ways to create an accurate budget for your household. Just pick the method that works best for you and commit to it.
Bring Out the Envelopes
There was a time when the envelope method of budgeting was king. Today, this method feels a bit old-fashioned, what with the proliferation of online budgeting tools available. However, for many households, the envelope system works just fine.
Here's how it works: Set aside a series of empty envelopes and label each of them with a particular expense category. One envelope might read "mortgage payment." Another might say "groceries," while still another might say "entertainment." When you receive your paycheck, put the appropriate amount of money -- the money you've set aside for each expense in your monthly budget -- in the right envelope.
If you stick to this method, when each of your bills come due, you should have enough money in the corresponding envelope to pay it. Also, when you want to go to the movies or eat out, you can only do so if there's enough money left in that "entertainment" envelope.
This method has fallen a bit out of favor as more consumers are using their debit and credit cards to pay their bills each month. However, if this method works for you and your family, there's no reason to abandon it. It is simple and effective, if done properly.
The Internet brings us the late-breaking celebrity news seconds after a star divorces or shows up on the beach 15 pounds too heavy. It lets us waste days Tweeting about what we ate for breakfast. It also gives con artists an easy way to scam people out of their hard-earned dollars.
However, the Internet has given us some good things, too, such as online budgeting tools.
The Web is now full of these tools, all of which let consumers enter their expenses and revenues to determine quickly where their money is going and whether they've breaking their budget.
Some of the more popular online budgeting tools include Quicken and Mint. Both are powerful offerings that come with money management tools, financial calendars, calculators, spreadsheets and everything else you need to track your spending and earning each month. Mint and Quicken are just two options. Search the Internet for "online budgeting tools" and see what you find. The only way to find the right online budgeting tool for you and your household is to try out several. You'll soon discover the online tool with which you feel the most comfortable.
If you are an Old National Online Banking user, you can take advantage of FinanceWorks, which allows you to see all your financial accounts in one place - including those at other financial institutions. FinanceWorks allows you to analyze your total spending, loans and investments.
You can use your bank for budgeting, too by opening separate checking or savings accounts for your various expenses. For instance, open a checking account reserved solely for your mortgage. For each paycheck you receive, deposit the right amount of money in that account. Then, each month, your mortgage payment should be ready to go.
Do this with your monthly grocery allowance, an entertainment fund, insurance allotment and car payment fund. If done properly, this method works a bit like the envelope method of budgeting. Only with separate accounts, you will not have to worry about storing large amounts of cash in your home.
Of course, these are just three of the many budget methods that you can employ. Be creative and experiment. You'll soon find the budgeting strategy that works best for you.
The only wrong method is not budgeting at all. That is a formula for running into debt and scrambling to pay your bills each month.
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