Budgeting Basics: Mint.com and the Freelance Method

May 12 2009, 10:20 AM

Recently President Barack Obama took a look at our country's budget and found a way to cut $17 billion. Yes, that's billion, with a "b."

Sometimes I stare at my own simple budget, wondering how I can trim $25 here and there, or how I can tuck a little more into savings at the end of the month.

The discussion of budgets on the national level made me wonder how everyone else manages their monthly cash flow. So I've decided to share two methods: my crazy freelance-inspired budget, as well as an online option that my friends have raved about.

Mint.com: Mint is one of many free financial software platforms, but its simplicity, for me, sets it apart. Signing up takes about three minutes. Simply supply your e-mail address, a password, and choose your bank. Then enter your banking log-in information, and Mint.com pulls all of your account information from savings, checking, and credit cards, laying it out in front of you. (Go ahead and open a beer, it's not easy seeing it all at once.)

The software breaks down your expenditures by Groceries, Restaurants, Entertainment, Gas&Fuel, and Shopping. It also offers ways to save and possibilities to input other net worth, like properties and Roth IRAs. But spend some time customizing it, or you, like me, might see a large percentage of your income show up as "Uncategorized."

My bare-bones budget: Being a freelancer, I used to break into a cold sweat every time I logged into my online bank account. I never knew when income would arrive or when my bills were going out. I had so many overdrafts that my bank has me marked as never being able to protest another overdraft fee again. Ever. For life. And frankly, I deserve it.

I've devised a simple way of budgeting that has worked well enough during the last two years that it's worth sharing. And no, it doesn't involve any fancy software, save a simple Word document.

I first list all of my income for a given month, as well as what date I'm expecting freelance checks. (I often have six to seven forms of income for a given month.) I then break my budget into two parts: the first half of the month and the second. I always try to balance my budget on the 15th, checking in to ensure that payments have come in on time and that I've stayed within the amounts I've allowed for larger expenditures, like groceries.

A sample:

May 1: Rent: 625

May 1: Comcast: 60

May 7: Cell phone: 75

May 1-15: Groceries: 100

May 1-15: Gas: 100

As each bit of income filters in, I mark it with a parenthetical (received), and as each bill is paid I mark them (done). In terms of groceries or gas, I save receipts and delete each amount from the total so I know how much is left.

Beyond my bills (and I list them all on the date I have them set up to be automatically deducted from my checking account), I use three simple categories: groceries, gas, and going out. As I mark money used from each account, I often shuffle any extra money to other categories. During those months I don't drive as much, I'll give myself some wiggle room to dine out with a friend.

Something I've learned after six months of rigid budgeting is the importance of some breathing room--even if you're living in a lower income bracket. I've finally started awarding myself $200 a month of "other," which covers all kinds of purchases that don't fit my static categories or that come up at the last minute. (Ink cartridges, hair products, and new windshield wipers are examples of a few "other" purchases.)

As for saving $17 billion, my budget hasn't begun to touch that number. But with a more conscientious eye on my money I've been able to put away three months of emergency savings--a far cry from my overdraft days.