Okay, so you’ve decided to make a budget. Congrats! You’ve taken the first step towards financial confidence! But how in the world do you make a budget? There are a lot of tools out there. What should you use?
If you want to go simple and not have to put any of your information online or limit yourself to any one product, you can make a simple spreadsheet. The upside to this is that it’s free (assuming you have a spreadsheet program on your computer) and you can view it when you’re online or offline. (You can also use Google Sheets, but then you’re putting things online, which may not be the route you want to go.) But for a program like this, you have to be sure to enter all of the information. Nothing will import automatically. In many ways though, this is good because you then have to look at all of the information very carefully.
Another simple option is software that you buy and install on your computer. One good option that many people use is Quicken. Quicken has been around for decades and has a lot of amazing features. Actually, after researching it, I’m wondering why I don’t use Quicken. You can import information from your bank and credit card companies, you can plan for upcoming bills, and you can see your spending and savings in a variety of ways. Quicken can also help you track your investments if that’s something you need.
There are also some purely online systems. Big advantages of these is that you can access them anywhere. Big downsides to these is that your information is all in the cloud. If you don’t have an internet connection, you can’t access your information. The sites could also go down, which is a risk. The two popular systems are Mint and YNAB.
Mint is pretty extensive and has a lot more features. Also, it’s free. Similar to Quicken, you have a lot of options on how to see your information. You can import your data, set a budget, schedule bills, and track your investments. It’s a lot of information, and you can easily access it on the go. That’s awesome. Of course, nothing is actually free, so Mint has to pay for the features it offers. How does it do that? Advertising. You will be shown targeted advertising for things like credit cards and other financial products. This doesn’t bother me in the least, but some people might see this as a negative. If you find yourself tempted by credit card advertising, Mint probably isn’t for you, but for most people, it’s not a problem.
The other big online option is YNAB. YNAB is more than a budgeting product, it’s a way of managing your money, and it’s certainly not for everyone. I’ve written extensively on YNAB, so it’s clear that I love it. But it does a lot less than many of the other products. That said, for me, the simplicity works. I can see the big picture, but am not distracted by charts and graphs. I’m forced to focus on the here and now, and that’s what I need in budgeting.
And of course, if you want to go simple, the best first step is a pencil and paper. Write it all down. Start with your monthly bills, things like rent/mortgage, electric, gas, cable, phone, things like Netflix, etc. Then see if you can gather up your less frequent bills, things like insurance, property tax, various annual fees. Write down your monthly income, and figure out what you have left after you’ve paid all your monthly bills and saved for those infrequent bills. That’s what you have left for food, fuel, and all those other expenses that come up every month. If the numbers fall short, figure out where you can find some extra cash. Do you need that big cable package? Do you need Netflix? It’s a lot of work, but it’s a good place to start.
Starting a budget is scary. But there are a lot of great budgeting tools out there for you to use. What’s the best one? The one that you will actually use.
Megan is a 40-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:
In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance. It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information. It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck. While that was working for me, clearly I needed a better plan.
While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.
Except that’s not what an emergency fund is for.
So I did a lot of research, read a lot of blogs, and decided that I needed a plan. I needed to budget. I needed to know what I was spending my money on. I needed to prepare for the future.
I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way. I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.