Dear Dr. Per Cap
I got my per cap the other day and need to plan for the holidays. What’s the best way to make a budget – handwritten, mobile app, or an envelope system like my sister swears by?
– Holiday Shopper
Dear Holiday Shopper
I once asked my favorite uncle “What’s the best rifle to take deer hunting – a classic Winchester Model 70, a Marlin 336, or a Remington 7600?” He looked at me casually before replying “The one you have in your hands, young buck.”
I thought about my hand me down Springfield 30-06. It certainly wasn’t the coolest gun or the most up to date but it shot straight, felt good on my shoulder, and it was mine. I realized what he meant.
The same holds true for budgets, spending plans, financial forecasts, or whatever else you want to call them. They come in all shapes and sizes, but whether it’s as simple as keeping a tally of monthly expenses on a notepad with a Sharpie or a slick mobile budgeting app on your phone, what matters most is what feels comfortable and what works for you.
Budgets all pretty much work the same way. Total income from wages, tips, per cap, self-employment earnings, and other sources are added up. Followed by a total of expenses- rent, car payment, food, gas, cell phone, and everything else you spend money on. Finally, subtract the difference to calculate cash flow. The goal is to have positive cash flow which means you’re earning more than you spend. Negative cash flow means you’re overspending.
Handwritten budgets used to be the standard but with so many financial technology or fintech tools many people now prefer digital budgeting methods. Your sister’s envelope system is tried and true old school. Mark envelopes for various expense categories and fill with only enough cash to cover your spending limit. When the money’s gone, that’s it until next month.
The $5 dollar budget is another great and simple strategy for cash users. Every time you get a $5 bill for change, sock it away. You’ll be amazed at how quickly old Abe Lincoln can help you save a few hundred bucks. However, more and more folks are swiping cards or using mobile payments instead of cash these days.
When it comes to mobile there are literally hundreds of budgeting apps for both iPhones and android devices. I use one called Personal Finance. It’s free, isn’t loaded with ads, and features a handy expense manager tool to create a budget. Most bank accounts also allow you to create a budget using the bank’s mobile app. Spreadsheet budgets on a laptop or tablet can be a good fit too.
So pick a budgeting system that works best for you, keep it simple, and stick with it. For more tips and tools for handwritten and digital budgets check out: https://sequoyahfund.org/dr-per-cap/. Ask Dr. Per Cap – EBCI Money Smart is brought to you by Sequoyah Fund and Shawn Spruce Consulting. For more information, visit www.sequoyahfund.org. To send a question to Dr. Per Cap, email agoyopi@gmail.com.