Technology

Updating An Old Budgeting System For Big Savings

BOSTON (WBZ) ― With the high price of gas and groceries, all of us are looking for ways to make better use of our money. Some people are updating an old fashioned budgeting system.

The Park family, with three small children, has to be aware of every dollar they spend. Each month, Sarah and Charlie figure out what they will need for everything, from haircuts to utilities. Then they literally put that amount of money in a specially marked envelope. The next step is to track the expenses from each envelope on a computer program they created. "It's a way to see what you have available. Rather than just using the cash in the envelope, you have a number that's on the screen," said Charlie. 

Their program is similar to a spreadsheet. They can see exactly how much they have left to spend in each category. There are several sites where, for a fee, you can download software to track your spending. Rami Sethi of www.IWillTeachYouToBeRich.com said it's a high-tech approach to a simple way of budgeting. "When you use the envelope system, you're controlling where you spend and, the most important part is, you're imposing your own discipline on yourself."

Other envelope systems do away with cash and checks altogether and actually substitute debit card accounts. Each category of envelope is a different account or debit account. At the beginning of the month, you put money into each account and when it's gone, it's gone. Sethi believes this approach takes the envelope system into the 21st century.

Some people, however, don't want to deal with that many debit cards. Sethi said he prefers to set up one or two envelopes in the most important categories.

If you want to try this approach, it's important to talk to the bank to make sure there are no minimum balance fees. Sethi also said you might want to set up these debit card accounts without overdraft protection. "Call up your bank and ask them if they will allow you not to spend." That's right, allow you not to spend. That way if you only have $30 in your account, for example, and you try to spend $35, the transaction won't go thru. Although that might be an inconvenience, it will keep you from overspending and keep your budget on track. Sethi said "It's really about calibrating your own spending."

The fee structures vary on these services, and some allow a free trial.

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