Finding a budget that works
So Many Choices by: dewayne.brooks
When my wife and I started following a budget more than a year ago, I decided to use something straight forward and simple, a spreadsheet. I had used Quicken in the past and found it too difficult and frustrating. I needed something that would budget the way I wanted to budget, something that gave me the flexibility to do what I wanted to do.
At the time, a simple custom spreadsheet was the right solution. As I progressed I realized I wanted something more automated that took less time to update and maintain. I finally settled on You Need A Budget after evaluating lots of various options. It works great for me, but let’s take a look at how you can find a budget that works for you.
You first have to establish your purpose for having a budget. Is it to control your spending? Is it to track your spending? Is it to insure you live on less than you earn? Is it to focus on a specific saving or debt goal? Or is it all of these?
Finding your purpose in wanting to budget will really drive what budget process works best for you. Once you understand the purpose, you can determine what requirements in a budgeting solution you’ll need to look for.
My purpose was all of the above. I was trying to get control of a financial situation that was, in my opinion, out of control. I wanted to live on less than I earned, pay as much as I could towards my debt, track my spending at a very detailed level, and report on current status and progress.
Easy to understand
Since I was new to budgeting, I wanted something that was easy to understand and follow. I set-up my initial budget was based on Dave Ramsey’s recommendations found in his book The Total Money Makeover.
Maintaining a budget that is simple and easy to understand is important. If it’s too difficult, you will become discouraged and quickly decide it’s not worth the hassle. The easier to understand, the more likely you’ll be to use it and follow it. Keeping it simple also plays a critical role if you are married in that it needs to be easy to understand and follow for your spouse as well.
As I started budgeting more, I found I wanted more flexibility and more features. I needed more flexibility in the way I managed my categories, including needing sub-categories, projections, and reports. Reports were an important part of being able to quickly view my budget status and my ability to easily share it with my wife.
As you start your “budget journey”, it will gradually change over time as you get better at it. I call it a “budget journey” because one year later, I am still constantly tweaking my budget. Always on the prowl for things I can do to make it easier to track, manage, maintain. You’ll refine the process and develop a budget that works for you. As a result, whatever tool you use, it needs to be flexible and adapt itself to the process that works for you rather you adopting the process required by the software. On the other hand, flexibility frequently equals complexity, so it’s important to find the right balance for you.
The first non-spreadsheet budget software I used was Mint.com. I love Mint in that it pretty much fully automates your finances. Mint added a budget feature some months back. The new feature is slick, but you can’t create custom categories. You have to use the ones predefined by Mint. While this may be acceptable for some, I wanted to be able to add my own, and remove some of the default categories that Mint used. You currently can’t do this with Mint. As a result, I seldom use it anymore. I find it interesting that the lack of one key feature made me pretty much stop using it.
Another feature that I wanted but couldn’t find in any existing budgeting software was the ability to have a budget per pay period. I get paid twice a month, and I wanted an overall monthly budget composed of two sub-budgets for each pay period. This way I could easily allocate certain expenditures to a particular paycheck. I could easily do this with my spreadsheet, but couldn’t with commercial software.
Quick to set-up and maintain
Probably the most important feature of your budget is that it must be quick to set-up and simple to maintain and update. I spend about 5-10 minutes per day updating my budget. I download my transactions to a file and import them into YNAB Pro and I’m done. When my wife and I review the budget, I bring up YNAB Pro, run a quick report and I’m done.
Set-up should be simple and easy as well. I’ve found set-up with most packages in really easy and some of the packages like Mvelopes, PearBudget, and YNAB Pro literally guide you through the process step by step.
Remember, the more time consuming and complicated the process and software, the more likely you will be to not budget and follow it.
Options to consider
Given I’ve evaluated various options, here are some of the packages and options I liked:
- Paper – This is the tried and true method of budgeting. Paper is also the easiest to implement and is a great starting point for the first timer. If you’re caught up in trying to find the “right” solution, just start using paper for a few weeks. Doing so will get you started and help you determine what needs and requirements for a budget you may have.
- Custom Spreadsheet – Again, this is what I started with and is the most flexible option. Unless you are very familiar with MS Excel or some other spreadsheet package, this option can have a long set-up time. The more sophisticated your budget, the more set-up time it will take. For me, as I continued to add more features, it became too complicated and time consuming for me. The spreadsheet is another great way to start, but not always the best option for long term.
- Mint.com – Mint is a really slick online web application that has a very slick and easy to use interface. Mint hooks up to your bank, and automatically downloads and categorizes your expenditures. You can set-up a budget using Mint’s predefined categories and set-up notifications that tell you when you’ve exceeded a budget category or that your balance is low. Mint also provides suggestions based on your spending that may save you money. Mint is a great package and what makes it even better is it’s free. Due to the fixed spending categories, Mint didn’t work well for me, but I strongly encourage you to try it out.
- Mevelopes – Mvelopes is another online web application that computerizes the older paper envelope system of managing your money. Mvelopes takes you through the process of setting up unique envelopes for each of your spending categories and then allows you to assign a money value to these envelopes on a monthly basis. As you spend money throughout the month, the money is removed from these Mvelopes. I really like Mvelopes and it did everything I needed. The envelope system of managing money is very straight forward an easy to understand. This would have been my choice, but Mvelopes charges $9.95 on a monthly basis. While not steep at all, it was just more than I wanted to spend over the long haul. Mevelopes does offer a 30-day trial though, so I’d suggest you sign-up and give it a try. It’s easy to cancel if you decide you don’t want to continue with them.
- PearBudget – PearBudget offers two different solutions, a spreadsheet and a very nice online web application. Pear budget is very simple and straight forward. It literally walks you through the process of creating a budget one step at a time, and even helps you handle large expenses that don’t occur monthly. I decided not to use PearBudget as it doesn’t provide any automation for entering transactions from the bank. Remember, I wanted a “quick to maintain” budget, and having to manually enter my transactions wasn’t quick enough for me. If you’re open to manually entering your transactions, than PearBudget might be the right choice for you. Both versions are free (they’ll start charging for the web version once it’s out of beta), so give them a a try.
- YNAB Pro – This is the product I finally decided to use. While it didn’t meet every criteria I wanted, it was the best option for what I needed. I recently published a full review of YNAB Pro that will provide you with all the details.
Spend some time evaluating the different options, then choose the package that best meets your need. Try them out for a month and see how they work for you. No one budgeting solution works for everyone and sometimes to find the right solution, you have to be adventurous.
What do you use? What’s your experience with the product’s above? What do you look for