Your preferences and tastes determine which free budgeting tools are best for you. Some tools automatically look at your bank, credit card and other financial information to deduct your spending and add your incomes. Other tools require you to manually record all expenses and earnings, either by hand or on a computer.
A ledger allows you to record all your income and expenses manually on either a sheet of paper or using a spreadsheet on the computer. You can purchase a ledger at an office supply store or make your own on a plain or lined sheet of paper. Ledgers are fully customizable, but can be a lot of work since you have to keep accurate records and do all the math by hand, unless you use a spreadsheet, which does the math for you. You'll need to program the spreadsheet to add and subtract expenses and earnings.
List your budget categories in one column, then make note of the amount each time you spend in the category. Record your balance at the start of each month and deduct amounts as you go along so that you always have an accurate picture of your balance.
Using envelopes to help you stick to a budget is free and easy. It's a preferred method if you use cash for a lot of your purchases. Make one envelope for each budget category, such as groceries and clothing, and place a certain amount of cash in the envelope.
You can put the money into the envelopes as you receive each paycheck or divvy up the money at the start of each month, depending on your cash flow. Once all the money from one envelope is gone, you stop purchasing items in that category. Although this tool isn't for everyone, it's a great option if you use a lot of cash and need to visually see and physically feel where your money goes each month.
Mint is an online budgeting tool that connects to your bank accounts, investment accounts and credit cards. Whenever you receive money or spend money, it records the amount in your online budget. You can set up categories as you see fit and assign a target amount to each category for each month. Mint also allows you to budget for occasional expenses, such as semi-annual car insurance payments.
The tool will send you alerts when you go over budget if you wish as well as when you are charged fees or interest. You have the option of turning these alerts off.
Other free online budgeting tools include Geezeo and Wesabe. What sets these tools apart from Mint is that they allow you to interact with other members of the community. Mint lets you set budgeting goals, such as saving for a vacation, Geezeo and Wesabe allow you to share those goals with other users.
One downside of budgeting tools online is security. Although the tools take security measurements to protect your information, you are still allowing an outside party to look at data from your accounts, which may make some people nervous.