is budgeting the answer to cost of living crisis


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When the cost of living is on the rise, more and more Americans are turning to a budget as a way to make ends meet.

A recent survey by debt.com has shown that 80% of Americans are now budgeting, up from 67% just two years ago.

This suggests that people are increasingly concerned about affording basic necessities like food and housing. While there is no one-size-fits-all answer to the cost of living crisis, budgeting can be an effective tool for many people.

What Type of Budgets do Americans Prefer?

More than half of Americans are still budgeting the old-fashioned way, with pen and paper and the remaining between spreadsheets, mobile apps, and financial advisors.

60% Prefer Pen and Paper Budget

With so many budgeting apps now available in the US, it's surprising that over half of Americans are still using pen and paper as a budgeting method.

Julian Goldie, CEO of Goldie Agency, says using pen and paper is much faster than using alternative methods. "I am kinda old-fashioned. So I prefer pen and paper, It is much faster. You just have to write it down and be creative in your own way about your budget."

Kyle Kroger, who is also a pen and paper budgeter, agrees. "Personally, for me, the gold standard is still getting a pen and paper and jotting it down. The pen and paper technique is convenient because of greater flexibility and convenience to jot down notes and make edits."

9% use Apps to Budget but Their Popularity is Rising

The number of people using apps for budgeting is small, but it's growing. While only about one in ten respondents to the survey said they use an app or computer program for their budgets, external market information shows that fintech is growing and outperforming market expectations.

Techcrunch reported that Fintech outperformed the market by three times in 2021. The same trends can be seen globally, too. CB Insights said that some budgeting apps in the UK also saw an explosion of market share vs traditional methods in recent years.

Jake Hill, CEO of DebtHammer, agrees financial apps are the way forward. "As a financial expert, I have helped dozens of people make budgets in the last year. I always recommend that people use Mint for their budget, a free online tool. It’s what I use, and I find it really straightforward and user-friendly. The cost of living crisis has made paying off debt much more difficult for most people, and since I help my clients create strategies to get out of debt, developing a budget with them is the very first thing I do.

Michael Williamson, a startup marketer for Hoist, is also a fan of financial technology and uses the popular app YNAB as a budgeting tool. "I appreciate how it lets me allocate for the essentials as well as retirement, savings, and Health Savings Accounts contributions each month. No longer do I feel hesitant about booking a weekend getaway–I can easily look and see that all my long-term goals are accounted for."

Some are Using a Combination of Methods

Whilst the survey captured the primary methods, we found that some people opt to use more than one budgeting method to keep up to date.

Michael Jan, Web Content Specialist at Pyramid Credit Repair, said he uses two methods to capture expenses when on the move. "I used two platforms, one is Microsoft Excel and second is the note app on my smartphone. The reason is two because when we go outside and have lunch/dinner, I make sure that the expenses are still included. Then once I get home, I put it all together on an Excel Sheet."

Michael says he likes to keep it simple "The category entered on the column tab is the income, expenses description and just the date. If you want to automate the data, there are some templates you can download on the web."

Has the Cost of Living Caused the Increase in Budgeting?

A 13% increase in two years is not a small number, so what is behind the rise of Americans turning to budget?

The cost of living has increased dramatically in recent years. A study found that 40% of Americans struggle to pay for basic necessities like housing and food.

Ari Shpanya, CEO of LoanBase, said that the pandemic forced him to start budgeting "I've been using the envelope budgeting method, through the app You Need a Budget. I started using this as the pandemic because I started not seeing where all my digital money was going. I knew I was paying bills and not sure where everything else was being spent."

Tim Connon, Founder of ParamountQuote, agreed that having a budget has helped in recent times. "By sticking to a budget, we have been able to identify and cut out miscellaneous expenses that were not needed and sticking to our budget goal. This has helped us in a time where the cost of living is on the rise."

Melanie Hanson, Editor in Chief, EDI Refinance, said she started budgeting a month ago after noticing prices rise in restaurants. "We've noticed rising prices the most when it comes to restaurants. Delivery and takeout prices have been sky-high lately, so we've limited ourselves to a fixed dollar amount every month for these purchases." 

She goes on to say that it has even helped her to get back into cooking "It has helped us save discretionary income for other things and also encouraged us to get back into cooking in a big way."

Should Everyone Budget?

88% of people who responded to the survey said that everyone should consider budget, regardless of income level or debt status. Budgets are not just for people who are struggling financially – they can be helpful for anyone who wants to get their finances in order.

Budgeting can be a great way to stay mindful of your spending and make sure you are not overspending on unnecessary items.

It can also help you save money for important goals like retirement or a rainy day fund.

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About the author 

Mary Elizabeth

Mary Elizabeth is a passionate advocate for financial freedom. She is the founder of MeMoreMoney, and a featured Personal Finance expert in GO Banking Rates and Yahoo! Finance. Mary loves to make money simple and understandable for everyone. Her goal is to help people make simple changes so that they have more money to live the way they want.

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