6 reasons to try budgeting on paper
There are all kinds of budgeting apps out there – some are even free. While there are scores of people downloading these, an app may not be the best solution for everyone. If you struggle with spending too much or you’re new to budgeting, you may find that doing your budget by hand is a better option.
That may sound outdated in today’s digital world, but there are some compelling reasons to go ‘old school’ when it comes to budgeting.
Increase awareness
When you do your budget by hand, you engage more deeply. Physically recording your income, expenses, and savings can slow you down (in a good way) so you really think through where your money is going.
Where automated budgeting apps show you a broad overview of your money habits, the act of manually recording every transaction keeps you close to the details. This naturally increases your awareness of the decisions you make and helps you better understand your relationship with money.
Stay engaged
Budgeting apps offer a brief glance at your finances but may not push you to go further. A study by the Consumer Financial Protection Bureau found that, “Although 96% of survey respondents reported that they had made a budget at some point in the past, they reported that they compared their spending to their budgets relatively infrequently, with only 12% comparing their spending to their budget daily, 13% comparing weekly, and more than half comparing their spending to their budget once a month, if at all.”
If you’re not reviewing your budget consistently, then the app isn’t doing the job. Writing out your budget by hand encourages you to stay engaged with your plans and revisit your goals when it’s time to track new expenses.
Understand spending habits
An app will track your spending for you. While that’s convenient, it’s not much help if you want to change your spending habits. This is where doing your budget by hand can excel. You have to jot down each expense as opposed to simply reviewing them in an app. With the manual process, you are more likely to find yourself thinking twice about purchases you made. This can impact your spending behavior. As you think about making a purchase in the future, you may find yourself remembering the expense tracking and start to critically evaluate that purchase.
Create a sense of ownership
The act of putting pen to paper can deepen the sense of ownership you have with your budget, and you could place a higher value to it than you would to a budget created with an app. This is known as the IKEA effect. It’s a cognitive bias we have where we place a higher value on things that we build ourselves.
This sense of ownership may help you become more proactive and involved with your budget, revisiting it regularly to review and make adjustments.
Connect with your goals
Doing your budget by hand can strengthen your connection to your financial goals. Maybe that’s saving for a down payment on a house or paying off your credit card debt. Whatever the goal, physically charting your progress, marking milestones, and adjusting your budget helps you visualize the progress and cultivate a stronger sense of commitment to your goals.
Customize your budget
Budgeting apps often come with predefined categories and structures that may not align with your unique financial situation. Creating a budget by hand provides the flexibility to tailor your categories and allocate funds according to your specific needs and priorities. This customization ensures that your budget is a true reflection of your lifestyle and goals.
The best of both worlds
Your approach to budgeting doesn’t have to be an either/or decision. You could adopt a hybrid approach that combines the best of both worlds. You can use an app to aggregate all your information in one place, taking advantage of the comprehensive view and real-time tracking. Then you can transfer all that information to your handwritten budget sheet, allowing you to spend time with each transaction and reap the benefits of doing a budget by hand.
So, what is the best method of budgeting for you? It’s the one you’ll stick with. Whether that’s app-only, a paper or excel template, or the hybrid approach, choose the method that fits how you like to do things.
To jumpstart your budget habits, check out our budget worksheet. Also, learn more about the budgeting and spending tools in the First Federal mobile app.
