Intro

There are several ways to budget, and it’s just a matter of finding the way that works for you. One way to do that is by your learning style – if you know which style is yours. Another way is deciding whether you want to be hands-on with your budget or not. The third way to find out is by deciding if you want to spend money on an app or do it yourself. Last but not least, I will explain the pros and cons of automating transactions.

Learning styles

There are four learning styles – visual, auditory, reading/writing, and kinesthetic. Patterns and shapes may work best for you if you are a visual learner. These can include graphs/diagrams, which you can find in apps or create in a spreadsheet.

Speaking your thoughts helps you articulate them if you are an auditory learner. This means that it does not matter if you use an app or make a spreadsheet because you would need to explain it out loud either way.

If you learn best using reading/writing, you understand information when it is in written form. Same as auditory learning, it does not matter which you use because either way, your budget will be in written form.

If you are a kinesthetic learner, you learn through doing. With budgeting, you can use personal experiences. Take what you have done in the past and learn from that. If you have not budgeted before, you can use trial and error. It would help to get to know your spending and tweak it as needed.

Hands-on or not?

Are you a hands-on person? You may prefer spreadsheets, notes, or the envelope method if you are. Spreadsheets can help you do the math, and you’ll be able to make charts or diagrams if you like. When I say notes, I mean just jotting it down on a piece of paper or in your notes app. Then with the envelope method, you can use actual envelopes or an app/spreadsheet that mimics the envelope method.

If you are a hands-off person, you might prefer forms of budgeting that require less control. If you have a steady income, budgeting like this could look like setting a budget and then creating auto transfers within your accounts. Some apps help you do this as well.

Spend on an App or do it Yourself?

One thing you have to consider when deciding to spend money on a budgeting app is the cost of doing so. There is almost always a free version of an app, and it is best to try that version first. That version is more than enough for your needs most of the time. If it is not, you could consider trying other free apps, but if you are dead set on one app, then spending the money on it might be worth it. Investopedia has a list of budgeting apps that they recommend here.

The risk involved in using a budgeting app is also something to consider. Apps connect directly to your accounts to pull data from so you can use the app. This means that your accounts could be hacked because you have to allow that app constant access to them. Your bank could be hacked even if you do not use an app, but the more your information is out there, the higher the chance that something might happen.

The reward associated with using an app is also important to think about when deciding to use one for budgeting. Using an app could take less time than budgeting by hand or using spreadsheets. Apps may also have reminders or notifications that you might find helpful. These things might allow you to focus more on the things you want to focus on instead of spending time doing something you do not want to do.

Pros and Cons of Automating Transactions

The Pros:

1) It can make things easier if you do not want to transfer money around your accounts every time you get paid. Your bank will transfer the money for you at the time you scheduled for it to do so.

2) It can make things easier if you have a money disorder. This can include gambling or impulse spending. Automating transfers can help you keep your money safe in case something happens.

The Cons:

1) It can make things difficult if you need full liquidity. People who need full liquidity are usually people who live paycheck to paycheck. A lot of the time, automating transactions can make your money less liquid, and when you live paycheck to paycheck, you need as much liquidity as possible in case something happens.

2) Forgetting about automated transactions can cause you to overdraw your account. If you automate and do not have a consistent paycheck or forget the schedule you set when you automate transactions, you could overdraw your account.

Struggling to stick to your financial goals? My Financial Goals Workbook can help—learn more here.