budgeting tools

It’s the beginning of the month!  How do you budget for the month ahead?  This post will focus on budgeting tools. 

It’s a little ironic.  If you think of your favorite financial gurus or even financial sites, you’ll be hard pressed to find personal budgeting content.  I scanned sites of those that I’ve come across through the years: Suze Orman, Dave Ramsey, Jill Schlessinger, Tom & Don (the last two are local AM radio hosts) and I only find personal budgeting content and tools on Dave Ramsey’s site.  Then if I hop to Fidelity, Vanguard, Yahoo Finance, still nothing.  You will find content on building savings, establishing an emergency fund, and managing investments, but not one thing on creating a budget or managing your own income statement.  I understand that many of these sites are focused on investing and provide products and services to manage your retirement and long-term investment goals.  However, what an atrocity!  Budgeting is such a critical tool that enables the funding and prioritization of investment strategies.  And yet, the discipline of budgeting is uncommon. 

Dave Ramsey has done several studies researching the occupations of millionaires.  They will surprise you.  Here are the top 5:

• Engineer
• Accountant
• Teacher
• Management
• Attorney

Teachers?!  Income can help, but clearly it’s not required to build wealth.  Understanding processes, prioritization, and a telling your money what to do does.  The majority in this study didn’t inherit money, they participated in their company’s 401k plan, and they use a grocery list when shopping at the grocery store.

Budgeting is daunting.  I put it off for a long time.  And in order to get over that hurdle, you need a way to make budgeting easy for you.  What you like in a budgeting tool may be very different that what I look for.  I’ve included a number of options to explore that may fit what you need.

What I look for in a budgeting tool:

• Linked to bank transactions, so that I don’t have to group and enter data category by category (this could be an app that links to your bank account, although this feature usually requires paying for the app, or downloading an entire month’s worth of transactions at a time and dumping into an excel sheet)
• Custom categories (the standard categories apps or banking institutions use aren’t always the categories I want to use)
• Tracking of more than one month at a time – I appreciate seeing a trend of spending and being able to see a year’s worth of spending to inform how I budget.  I also like to set my budget for an entire year ahead versus having to do that month by month.

Here are some options I’d explore and see what fits right for you.  Again, you want it to be something that you’re comfortable navigating and can use over and over again.

Do-it-Yourself Spreadsheets

This option will give you the most flexibility.  You can customize whatever you want and track whatever you want.  I work in corporate finance, so Excel sheets are like home to me.  The nice thing about Excel is you can leverage it according to your skills – you can hard code data from your banking institutions site, or you can create formulas and pivot tables that will automatically refresh each time you add another month’s worth of transaction detail.

Pros

• Very flexible                               
• Easy to track historical spending
• Transaction detail available
• Customizable categories
• Free

Cons

• Requires some level of Excel skills or willingness to learn
• Requires set-up time
• If you’re budgeting with your spouse, you’ll have to share the file

Apps

Apps have some pros in terms of ease of use.  You can find apps that will link to your bank account and automatically feed transactions into your budgeting tool.  They will prompt you to the next step, and what you need to do to create a budget.  The challenge I find is it’s hard to review your spending on your phone, especially if you want to see historical spending and transaction detail month to month. 

Pros

• Easy to use
• Minimal set-up time
• Easy to share with additional users
• No excel skills required

Cons

• Limited to design of app
• Potentially difficult to see or plan outside of existing month
• Monthly fee for non-standard features

Sites (Credit Union, or Banking institutions)

If I weren’t comfortable in Excel and didn’t want to learn, this would probably be my second choice.  We bank with a credit union and they offer a budgeting tool that’s incorporated into our online account. You can set up budgets, linking your transactions is easy, and it’ll even notify you when you exceed your budgets (if you’re into such notifications).

Pros

• One space for personal banking and budgeting
• Easy to use
• Easy access for other account holders

Cons

• Limited to design of tool; can’t customize categories
• A little clunky and cumbersome to view historical spending and use

I hope you find this information helpful and that it inspires you to better manage your finances.