Envelopes, spreadsheet or app: which budgeting method to choose

The best budgeting method is the one you are still using six months from now. There is no single right one for everybody: it depends on how much time you want to spend, how you pay for things and how many people share the expenses.

In your head

You roughly know how much you have and how much you can spend. It works with a low income and few expenses, but it fails at the first busy week: nobody remembers everything, and small purchases are the first to slip through.

Envelopes

You split the month's money into envelopes, one per category: food, transport, leisure. When an envelope is empty, that's it. It is very visual and stops overspending, but it is impractical with cards and online payments. The digital version of the same idea is accounts or categories with a fixed limit.

Notebook

One column for what you planned and another for what actually happened, by category and month. Simple and cheap, and the act of writing makes you more aware. The weak points are the sums, which you do by hand, and the fact that the notebook isn't always with you.

Spreadsheet

Fully customisable, it does the maths for you and can make charts. It takes some skill and discipline to enter every transaction, usually at the end of the day or week, which is already too late to remember everything.

App

It is always in your pocket, records spending on the spot and does the sums and charts for you. Compare features, cost and privacy before you choose, and check that you can export your data if you ever want to switch.

Before you choose: a SWOT analysis of your finances

Companies use SWOT analysis (strengths, weaknesses, opportunities and threats) to plan. It works for personal finances too. Take a sheet of paper and fill in the four boxes:

• Strengths (internal): you already save every month, you have no credit card debt, your job is stable.
• Weaknesses (internal): no emergency fund, a lot spent on eating out, no idea how much you spend each month.
• Opportunities (external): overtime or freelance work, fee-free bank accounts, an expected pay rise.
• Threats (external): your rent might go up, prices are rising, there is a risk of reduced hours at work.

Then choose one action for each box: use a strength, fix a weakness, take an opportunity and protect yourself from a threat. Very often the first weakness to fix is "I don't know how much I spend", and that is where a budgeting method comes in.

About FinanceFlow

If you choose an app, FinanceFlow works in the browser and on Android, in six languages. On the free plan you record income and expenses by category and see the month's summary. On paid plans, groups work like digital envelopes, with a monthly or weekly limit and an alert as you get close. You can also snap receipts so you don't have to type anything, and export everything to CSV.