DIY budgeting tools: the pros and cons of the do-it-yourself approach

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DIY budgeting tools: the pros and cons of the do-it-yourself approach

Every wonder why there are countless books, articles and blog posts about budgeting? It just happens to be one of the most misunderstood and dreaded topics in the land of personal finance. We all know we need to budget. We put it on our New Year's resolution list and swear that this will be the year we finally tackle budgeting.

You know what happens, though. Somewhere between month one and two you decide it's just too painful to follow a budget and go back to whatever method you were using before to track your money, which if you're like most people is no method at all.

Budgets are so important because they are the entry point to all those wishes, dreams and goals that you want to achieve. If you know exactly how and where you are spending your money, you have more control over the direction of your money. If your goal is to retire early and travel the world, then you will need heaps and heaps of money saved. Even if you have a small goal of paying down debt, a budget can be a tool that keeps you on track.

There are two schools of thought when it comes to budgeting: take the DIY approach or rely on a technology-based system. In our companion post we talk about the pros and cons of the technology-based approach,, but in this article we're going to cover the pros and cons of using DIY budgeting tools to master your budget.

Pros of DIY budgeting tools

It's a bit obvious, but the first pro is simply that a DIY budget is inexpensive. You can create an Excel document pretty quickly and be up and running in no time. DIY budgets also don't rely on technology to keep track of your spending. Creating and maintaining your budget is easy to change and update and you can create a budgeting system the way you like it. This matters because if you create a budget system that is either time consuming or simply confusing, you're probably going to throw in the towel pretty quickly.

A DIY budget is also very relationship friendly. You can easily share your budget with your spouse or significant other in Google docs or a Dropbox account and make changes on the fly. Some couples even print out their budget and hang it on the fridge so you can both keep on track of your spending.

Cons of DIY budgeting tools

While a DIY budget is easy to set up, it's also easy to get off track and not know exactly where you are spending your money. As a result, budgets are only as good as the numbers you put into them, so it’s easy for a budget to tell you one thing and your bank account to tell you a vastly different story. For example, if shopping is a weakness, a DIY budget won’t let you see if you are going off course in your spending until the end of the month. That could spell disaster.

Lastly, a DIY budget can be time-consuming if you don't have a system set up that is easy for you to follow. This is one area where relying a little on technology can help. With the use of technology you have your budget in your pocket 24-7 and can be in constant communication with your spending each month. A DIY budget, on the other hand, requires you to take a few additional steps to make sure your spending is in line with your budget.

It should be clear by now that to win with DIY budgets, it's all about the system you create. Check out this video on how to create a DIY budget system that takes only 20 minutes each month:

Use Excel to create your budget template listing your income and expenses, both variable and fixed. Make sure your budget is updated each month and double check your budget against your bank statements to make sure you are accurately budgeting in each spending category. In the end, it doesn't matter if you choose a DIY or a technology based budget, but rather that you get in a good relationship with your budget.

Photo credit: Craig Chew-Moulding