- I have used virtually every budgeting tool out there, from notebook and paper templates to Excel spreadsheets and old software programs.
- The secret to better budgeting is understanding our psychology and our lack of desire to think about how we spend our money.
- Budgeting apps today are more robust than ever and automatically do the work for you, streamlining the budgeting process.
How to budget when the word makes you cringe.
I have a confession to make: I dislike budgeting. I have been in the finance industry for over 20 years and I still cringe inside when thinking about it. I know I am not the only one. As found in a recent OppLoans survey, 73% of Americans don't regularly follow a budget and 65% have no idea how much they spent last month.
The famous singer Rihanna sued her accountant claiming that she was "effectively bankrupt" after getting bad advice from him. The accountant fired back: "Was it really necessary to tell her that if you spend money for things you will end up with the things, and not the money?"
Without a doubt, budgeting is important. There is no way you can be financially successful without knowing how much you make and how much you spend. People get into financial trouble when they spend more than they have, take on debt they can't get out of, and have nothing to show for it.
Evolution of budgeting
In order to proactively manage your money, you have to budget. But how fun is it to tediously go through each of your transactions and track every penny? When I first started budgeting in college, I wrote every expense in a notebook. That didn't last long. I then created a massive Excel spreadsheet with complicated equations and ended up only confusing myself. Strike two.
Next I purchased Quicken and Microsoft Money (no longer available since people weren't using it) to help me budget. I can't tell you how many times I would start, stop, and get started again. I also got annoyed that I had to buy the new versions every year for the updates. Eventually I spent more time downloading and categorizing my transactions than actually understanding my overall financial picture. Strike three!
Thank goodness for technology
Thankfully, budgeting programs and apps have made it more intuitive to track our finances. You can check from your computer or mobile device anywhere at any time. It only takes a few minutes to set up your accounts, and what took me an hour to do in the past now takes a matter of minutes.
After trying different apps, I personally use Mint and Truebill now. I have connected all of my financial accounts to the apps so all of my transactions are automatically downloaded. I can see all of my financial accounts in one place. For someone like me who has over a dozen different bank, credit, loan, investment, and other financial accounts, this is a huge benefit.
More visibility and insights
Both apps analyze my past spending to create a recommended budget for me. This is perfect for me because all of this is effortless and the app monitors all of my financial transactions. I don't have to run any calculations and proactively check all of my different accounts. They even provide a breakdown of my finances through insight reports. These show my spending habits, make recommendations for where I can save, and tell me if I am on track to meet my goals.
There are quite a few customizable notification options you can choose. I created one where if I am within 50%, 75%, and 90% of a budget category, I am automatically notified. This way I am not caught off-guard if I go a little overboard one month. I am even notified of my spending trends with a comparison to the previous week, month, and year. It is easy to adjust my spending goals for each category. I have also set up the apps' widgets on my phone so I am constantly reminded and aware of my real-time financial status.
Leverage the automation
Probably one of my favorite features is where both apps will identify subscriptions and cancel unwanted ones on my behalf. I wasn't convinced at first but I was pleasantly surprised when they canceled three magazine subscriptions I forgot I had. All I had to do was click on the button in the app and it was done. I didn't even have to call anybody. Without the app, I would probably still have those subscriptions since we tend to avoid the extra steps required to cancel them.
The secret to budgeting, like most tedious work, is understanding the psychological component. Having to crunch all the numbers can be overwhelming and is probably the biggest excuse to procrastinate. These apps take all the work out, so even those who dislike budgeting are quickly drawn into the easy-to-understand reports and dashboard. By monitoring and keeping track of everything, the apps act like a personal assistant telling me how much I am spending, when I got paid, when certain transactions went through, and making recommendations for how to best manage my money.The apps have streamlined the process and based on your spending style, will help you find a good balance between spending and saving.
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