AI Money Apps Can’t Replace Good Old Pen and Paper

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With so many resources available, many rely on budgeting apps and software to manage their finances. While I've personally recommended all kinds of personal finance apps for your budgeting needs, I have a confession. My favorite budgeting tool isn't the latest AI-powered app. Instead, my go-to hack to watch my spending is always going to be good ol' pen and paper. And I'm not alone in this. Here's how going "old school" and budgeting with a pen and paper has its advantages when you want to closely watch your spending.

How budgeting by hand can help you save money

As we’ve previously covered, and as you’ve probably noticed in your own life, touching money and giving it away hurts inside your brain. So if you need a mental nudge to stick to your budget, the physicality of pen and paper is much more powerful than checking your online bank account. I think of it as adding a sort of friction that apps simply don't provide. If nothing else, spreadsheets can get overwhelming and discouraging fast; pen and paper is a way for you to take a small, manageable step to get your spending under control. Let's take a look at some actionable steps to start budgeting by hand.

Track where your money is going

The most important question to answer: Where does my money go? Don’t settle for estimates here. Look your spending habits full in the face. Pull together recent bank and credit card statements, bills, your latest paystub, and any other documents that outline your income and expenses. This gives you a complete picture of your finances.

Make a list of your regular income sources and amounts, such as your salary after taxes, child support received, and income from other jobs or investments. Total up the income.

From here, consider taking another sheet of paper for broad expense categories. Write down common spending categories like housing, utilities, transportation, food, debt payments, entertainment, etc. Leave plenty of room to write in amounts next to each.

Fill in and add up expenses

Let's review some of the basics of budgeting that the apps make so simple, but that we want to be more hands-on with in order to get that friction. Use your bank and credit card statements to assign amounts to each expense category you listed. Items like rent, internet, car payment or insurance go in the appropriate categories. Use a calculator to add up the expense amounts in each category. Then add all categories together for a total monthly expense number. Then, take your total income and subtract your total expenses to find your leftover monthly balance.

Tips to actually use your budget

Once your budget is set, use it actively each month, tracking your actual spending against the amounts budgeted to avoid overspending. Sounds simple enough, but the thing that makes pen and paper so effective is also what makes it challenging: Effort.

Get in the habit of taking notes throughout the day as you spend. Alternatively, you could sit down once a month and copy down your bank statements to your physical paper budget. Where apps have paper beat these days is the convenience of your phone always in your hand. One solution to this is to keep your budget in a handy notebook, or to schedule in a physical sit-down budgeting session. Send yourself a monthly calendar invite for yourself.

Another tip to make use of pen and paper is to physically write down the things you want to buy before you buy them. Use those bank statements to inform what items make your official “to-buy list.” When you read over items on this list, you’ll be able to make a more thoughtful decision as to what you really need.

If you struggle with reckless credit card swiping, a hands-on budget is a good place to start becoming a more conscientious spender. Use the tangible act of writing your finances to build self-awareness and accountability around your spending habits.