Budgeting: Two High-Level Strategies

I have tried multiple budgeting strategies in the past and have found two that I would recommend. The first is more tactical and fantastic when your budget is tight. The second is better for when it feels easy to live comfortably beneath your earnings.

Getting Tactical

Money is tight, and you need to know how much you should be spending on groceries. There's an Amazon purchase you want to make, but you aren't sure if it will jeopardize your savings goal for the month or some other purchase.

If this describes you, I HIGHLY recommend using an envelope budgeting system. This can be done physically, or digitally (I would opt for digital personally). I used YNAB's budgeting software for a couple of years early in my marriage when money was tight, and we were still getting through college. If the yearly YNAB subscription is too expensive for you, something similar could be accomplished with a spreadsheet (let me know if you'd like me to build a template for this).

Why You Should Track Your Net Worth (And How to Do It)

Everyone should track their net worth. If you find it easy to live on significantly less money than you make, you might not need to use a system as involved as an envelope budgeting system as well.

Once I got into a more stable job situation after college, I found that my spending habits started to stabilize as well. It felt less necessary to log every single purchase in YNAB because I knew most of my small purchases were pretty regular and wouldn't affect my big-picture savings goals. After canceling my YNAB subscription, I still wanted a way to keep an eye on my progress toward financial goals and recognize anomalies in my spending if they came up. This is when I created my net worth tracker.

It's super simple to track your net worth. After the end of each month, just grab the account balance for each of your accounts and add them up. I use a spreadsheet do to this:

This is what it looks like with some fake data:

With net worth tracking and automatic transfers each month, it is pretty simple for me to keep tabs on my finances and ensure we are on track to reaching our financial goals.

I will make another post that goes into detail on how I set up my accounts and automatic transfers.