Updated: Feb 26, 2020
A few months ago, I came across an article about The Budget Mom. This Mom is an American woman called Kumiko who developed a business that revolves around her method for budget management and gaining financial independence. She set it up because she herself went through a process of getting out of debt and while doing so developed a budget tracking system and hence decided to turn it into a business. What surprised me about her method is that it is completely manual - the documentation and calculations are done on paper. And preferably - on paper products which she sells (that's basically her main business) - planners, diaries, pages, envelopes.
The reason that I was surprised is that such a manual method goes against the trend of automation towards which the whole world is going. Her method reminded me of the '90s, when I was young and single and managing my own rather small budget in a notebook. I wondered to myself whether it is possible nowadays to manage a complex family budget on paper, so I delved a little further into her method in order to understand it. One thing that I noticed immediately was that she mainly promotes use of cash, which, again, goes a little against the cashless society trend.
I concluded that her method is simply one of a variety of ways developed to achieve the same purpose, and that it's good to have diversity of techniques, because people are different! Not every method is right for everyone. Just like in other fields such as fitness and dieting, where the methods are so varied, but the bottom line for success is the same – just do something.
It is clear to me that a major reason why Kumiko promotes the manual method is that she makes a living from selling the paper products needed to implement her method. Of course, one doesn't really need to use only her products to do so, but it is quite hard to resist them. Psychologically, we perceive that we will be more successful in managing our budget using her method if we use those products. There are people who find that this is exactly what helps them to stick to the budget, that the tangibility of the method is critical to their success.
At the other end of the range are the automatic methods ones - programs/Apps/websites that automatically interface with data from the bank account and credit cards and present a snapshot at the click of a button. They are suitable for people who have no problem releasing usernames and passwords to external entities. These methods are indeed very convenient, because they require little effort. My opinion is that this convenience might just be exactly the huge problem with these methods - because for most people, growth and change only happen when effort is exerted. No sweat, no gain, as they say. And the honest truth is that budget management almost always requires behavioral changes.
And then there are the middle of the scale methods.
One of those is the one with which I work and which I teach my clients: using Excel and daily expense documentation in an App. The bank account and credit card data is entered in a semi-automatic manner into designated Excel spreadsheets, and from there into a budget tracking table. While precision and careful work is indeed required, this part should not take more than an hour or two a month. The delving into and the close proximity to the data that this method forces, lead to great clarity as to what needs to be changed (or preserved). And that's a huge advantage, making up for the not fully automated process.
Now let's talk about the App. The app needs to be updated manually with each purchase, but this should be done after deciding which data will be entered into it (and which not), as well as setting a budget against which the actual expenses will be measured by the app.
I chose the TOSHL app for this purpose, and I use it myself as do my clients. I like this particular app as it also has a web site (most similar apps don't) which is a very convenient feature, more than one user can use it at the same time and the data is synced automatically, it has a nice graphical display, and the free version is suitable for most users but even if one decides to upgrade, the annual cost is very reasonable (about 70 NIS). And should one wish, it's possible to auto-interface data from the bank account and credit cards.
Another middle of the scale option is a program such as GeltBox, which gives the user the option to auto-interface or self-import the data. I admit that I haven't experienced this program myself nor have I encountered a client who uses it, but on the face of it, it looks good. I also did not find explanatory videos on the site demonstrating the program, and it seems that their smartphone app still in early stages. The basic version of the program is free but it only allows to import 3 accounts (e.g. 1 bank account + 2 credit cards). The full program is $ 59 / year.
These methods are suitable for those who do not want to release passwords to third party entities, and/or those who are less technological but who also understand that their budget is too complex to manage on paper.
Important Note: There are many other programs apps and methods for budget management. In this post I mentioned just a few, because the purpose of this post is to demonstrate the broad scale of budget management methods and not to review apps and programs.