Budgeting is a powerful tool that can help you reach your goals and live life to the fullest. Instead if limiting and negative, budgeting is actually empowering and positive.
This is the fourth in a series of posts about budgeting and how to use it to get the most from your money and your life. This post discusses different budgeting tools you can use to gain control of your money and track your progress toward your goals. In the first post we discussed some myths about budgeting, what budgeting is and why budgeting is important. The second post discussed how to build your money awareness, allowing you to do a better job of managing your cash-flow and make better budget decisions. The third post talked about some different budgeting methods. I recommend you read all of the posts in order.
Before we get into specific tools you can use it’s important to remember that all you really need to budget is a pen and paper. So, if you are the type of person who is happy writing things down you can budget just as well as anyone else. It might take a little more time but the end result will be the same.
If you prefer to use technology to help you track your spending there are many, many tools/app/software that can help. There’s no way to review them all but I will give you a summary of some of the tools I have used and make a suggestion on a particular tool you might want to try for yourself.
Over the years I’ve used quite a few tools to help me build and track my own personal budget. A few years ago I settled on what I think is a very powerful and usable budgeting tool called YNAB which I will go into more detail about in a bit. First, I wanted to give an overview of some of the other tools I’ve used.
Remember, no matter the tool you use, the goal is the same…to take control of the money in your life and create a spending plan that reflects your needs as well as your goals.
I’ve been budgeting in some form or another since 1990 and when I started out it was with a spiral bound notebook and a Bic pen. All I did was list the current balance in our checking account, the income we were receiving and the bills we had to pay. When money came in I added it to the sheet and then subtracted out the bills and other expenses that were due before more income came in. I set spending goals & kept track of the amount we were spending in basic categories like food, rent, car payments,clothing, etc.
While it was a little tedious, it worked, and worked well. Keeping that budget helped us zero in on reducing the large amount of credit card debt that we had and also allowed us to start saving for the future. We were able to see what we had, what we owed and how much we were spending on a monthly basis. Just the simple act of actually writing down the spending made it more real, more important.
Quicken is one of the original “all-in-one” personal finance tools. It’s been around since the days of MS-DOS (1983) and I started using it way back in 1994 because it was better in my mind than a paper-based budget. I used it up until 2014 when I switched to YNAB.
Quicken is basically an electronic paper budget. You can track any income or expense that you want. You can set up budget amounts for each category on a month by month basis as well as track savings goals. The main downside to Quicken in my mind is that it can be overly complicated. It’s a bit of a “jack of all trades, master of none”. Because you can do everything from tracking individual stock purchases and portfolio performance to budgeting for your next vacation, there’s a lot of moving parts. The budgeting module seems like an afterthought even though it works well enough for what it is.
I’m a guy who loves me some spreadsheets and formulas, but even I was getting tired of all of the complication. That’s what prompted me to seek out a better budgeting alternative, which ended up being YNAB (see #4).
Mint is actually owned by Intuit, which also does Quicken. It’s grown into a powerful (and free, with ads) online platform for tracking your financial life. You add/link your accounts to Mint and transactions are automatically downloaded. You can build your budget and add goals. Mint keeps track of your spending and you can assign whatever categories you want to each transaction
Mint is a good tool but it has a few things that bug me about it. The main one relates to setting goals. If you want to setup multiple savings goals, say for Vacation, a New Car, and Home Repairs, you need multiple savings accounts to do it. In other words, only one goal can be assigned to a particular account. That means that you need multiple savings accounts in order to track multiple goals. That’s a little counter-productive and actually complicates things, not simplifies them.
After nearly 20 years of using Quicken and a lot of research I switched to YNAB as our personal budgeting tool in 2014.Why did I switch? Three reasons primarily:
The main reason I switched to YNAB was that it approached the budgeting process from a different perspective than I was used to with tools like Quicken and Mint. Instead of looking back at the last month and telling you what you spent, YNAB is a proactive system. It requires you to be forward-looking and intentional about every dollar you spend. This “intentionaliss” (if that’s a word) struck a chord with me and made a lot more sense than the reactive budgeting I was doing before. The YNAB process operates on 4 rules:
After I was drawn in to YNAB based on it’s forward looking budgeting process, I was sold on it because of it’s flexibility and ease of use. Now, YNAB won’t do your budgeting for you, but it will help you make the most of your time and provides you with the feedback you need to keep on track. To learn more about what makes YNAB different from many other budgeting tools, check out this page.
We’ll close out this series of posts with my recommendation of the budgeting tool to use. As you may have guessed by now, I really like YNAB. It’s flexible, accessible, has the right amount of automation (but you’re not forced to use that automation), and is fairly priced ($7/month). You can configure YNAB to match your specific needs. Pretty much everything is customizable. The only thing it doesn’t have (yet) is the ability for me, as a financial planner, to directly work with my clients who are using YNAB. I’ve expressed this feature request to them and they have indicated it will be part of a future update.
If you are looking to take control of your money and make decisions about that money in a more deliberate and intentional way, I can highly recommend YNAB. The best way to see if it’s right for you is to try it.
If you would like some help or feedback about YNAB, I’m happy to help in any way I can. Just contact me and we can go from there.
Setting goals and building and acting on a financial plan takes work. While many people have the time, motivation and energy to do it all on their own, many do not.
If you would like some help building your own financial plan or would like a second opinion on anything related to your financial life, I’d be honored to speak with you. You can contact me by sending an email to firstname.lastname@example.org or visiting our website at www.financialclaritypartners.com and clicking the link for the “Contact Us” page. Or, if you want to speak with me directly, go ahead and give me a call at 678-626-7526 and we can discuss your needs and determine if my services might be a match.
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