Free Money Finance

It's Budgeting Time of the Year

This is a re-post of a previous piece of mine. I plan to run it a few times the next few weeks as a reminder to all to get those budgets done. ;-)

I'm well aware that the end/first of the year is the time that many people review last year's budget, develop new budgets for the next year, or start a budget for the first time. As such, I wanted to offer some links and resources on budgeting in this post. First of all, here are the links:

• Know and Control Your Spending

• Why do Millionaires have Budgets?

• Three Ways to Track Your Spending

• Thoughts on Quicken vs. Microsoft Money

• Pretend It's Not a Budget: How to Create a 'Spending Plan' You Can Stick To

• Five Keys to Developing a Successful Budget

• Budgeting Part 1: Creating a Family Budget

• Budgeting Part 2: Living on a Family Budget

• Budgeting Part 3: Reduce Your Spending

Now for some resources. In the past, I've suggested that a viable budget tracking set-up could involve a combination of Quicken or Money and You Need a Budget (for more details see The Benefits of You Need a Budget and YNAB Question of the Month: How Does it Compare to Quicken and Microsoft Money?) and this is close to what I personally use (I use Quicken plus my own self-created spreadsheet). That said, I've asked readers what they think about using Mvelopes as a budgeting option, and I've received very favorable responses. As such, I've been recommending Mvelopes for those who want an electronic version of the envelope budgeting system. Here are some links to help you consider their service:

• Compare to Microsoft Money

• Compare to Quicken

• Take a tour of Mvelopes Personal

• Financial Fitness Quiz

• Free Budgeting E-book

• Free Debt Calculator

• Get a FREE 30 day trial of Mvelopes Personal

A Simple Bible-Based Budget

For those of you new to Free Money Finance, I post on The Bible and Money every Sunday. Here's why.

Recently my pastor shared what he considers a Bible-based budget. His breakdown:

• Give 10% of your income
• Save 10% of your income
• Live on 80% of your income

He noted that this budget wasn't stated explicitly in the Bible, but was a simplified budget compiled from the various teachings the Bible contains on money.

Personally, I think this is a very good STARTER budget. If someone is just beginning their budgeting, this seems like a great way to get them going. In fact, if you get to this point and never progress, you're probably better off than the vast majority of Americans. You'd certainly be among the top tier in both giving and saving if you put 10% towards each.

But as time goes on, I think you need to work to exceed the first two numbers and cut back on the third. We've been budgeting for almost two decades now, and we currently give way more than 10%, save way more than 10%, and live on way less than 80%. But it took time to get to this point. The keys: spending less than we earn (and not spending all of our pay raises) while working hard to maximize our income. It's that simple.

So, what do you think about the 10/10/80 plan -- good or bad idea? Any suggested improvements? 

Better to Budget by Year Versus by Month

Here's an interesting piece from the New York Times. It says that it's better to budget by the year than by the month. The highlights:

In one study, 87 college students predicted their food and entertainment spending for either the next year or the next month, and then kept weeklong diaries recording such expenses. When their predictions were compared with the actual expenses, as extrapolated from the diaries, the one-month predictors were laughably off. Those who estimated expenses for a year were closer to the mark.

Other studies described in the paper suggested that short-term budgeters tend to be overconfident. Long-term predictors expect to miss the mark, so they pad their estimates, which ends up making them more accurate.

My budgeting transitioned over time from the following:

1. I would budget by the year, then update my results monthly.

2. I would budget by the year, then update my results quarterly.

3. I would budget by the year, then update my results semi-annually.

4. I would budget by the year, then update my results yearly.

5. Now I don't budget at all.

As a reminder, this was over a 15-year period, so I didn't give up budgeting lightly. I still track my spending via Quicken, but I just don't have an "official" budget that I follow/update regularly.

Tracking Your Finances with a Rolling 12-Month Average

Here's a guest post from Gerry at Sailing Kitty.

The most basic measure of your financial situation is comparing your income to your expenses. It’s a simple equation. You take your income over a set period of time and then subtract your expenses for that same period. If the result is positive, you’re making more money than you’re spending; if the number is negative, you have some work to do.

The complicating factor is the period of time you use to measure. A year gives you an accurate picture but it’s too long a timeframe. Waiting until year-end to find out how you’re doing robs you of any chance to make changes in the meantime. You don’t want to find out after the fact that you’ve been spending more than you’re making over the past several months.

Tracking each month gives you the flexibility to make changes, but it tends to be inaccurate. Some months you get a windfall and your income looks great; other months you may have car repairs and income tax payments and your expenses skyrocket. In neither case, are you getting an accurate reflection of your situation.

To take advantage of the year’s long-term view and the month’s short-term flexibility, I track my finances with a Rolling 12-month Average. The Rolling Average flattens out the month-to-month peaks and valleys in my income and expenses, yet gives me a monthly measure of how I’m doing.

Here’s how it works. You need to know your monthly income and expenses for at least the past 13 months and preferably for 24 months or more. If you use Quicken or one of the web-based applications like Wesabe, these numbers are easy to come by.

• First, list the months for which you have data in the first column, put the monthly income in the second column, and record the monthly expenses in the third column. You can follow along on the Excel spreadsheet example attached below this post.

• Next, add up your total income for the first 12 months and record that total in the fourth column across in the same row as the 12th month. In the example below, the total is $65,421. Calculate your expenses for the same 12 months and put that total ($66,131) in the fifth column along the same row

• Now, subtract your 12 months of expenses from your 12 months of income and put the result in the sixth column. That number, -$710 in the example, is the dollar difference between how much you made in those 12 months and how much you spent.

• Finally, divide that dollar difference in the sixth column by 12 and record the result in the seventh column. This number tells you how much more (or less) you earned than you spent on average for each month during the period. In the example below, expenses exceeded income by an average of $59.17 each month.

• Now, repeat the process for the next 12-month interval, deleting the first month from your calculations and adding the 13th month. In the example below, you get a monthly average of $6.58. The average increased because we deleted a month in which expenses exceeded income by almost $500 and added a month in which earnings were almost $300 more than expenses.

• Complete the calculations for each successive 12-month interval until you get to the current month. Now you have your Rolling 12-Month Average. The progression of the monthly average numbers gives you an accurate picture of the state and direction of your finances.

If the trend is positive and the dollar numbers are increasing, you’re heading in the right direction. On the other hand, if the dollar numbers are negative and/or the trend is heading down, you need to get your finances on track.

One word of caution: Because the Rolling Average tracks your financial performance in successive 12-month increments, it’s difficult to see a dramatic impact in a single month. Each month has only a 1/12 impact on the average. When you string together several positive months, however, your Rolling Average will start to climb and you’ll know you’re heading in the right direction.

Download fmf_rolling_average_graph.xls

It's Budgeting Time of the Year

This is a re-post of a previous piece of mine. I plan to run it a few times the next few weeks as a reminder to all to get those budgets done. ;-)

I'm well aware that the end/first of the year is the time that many people review last year's budget, develop new budgets for the next year, or start a budget for the first time. As such, I wanted to offer some links and resources on budgeting in this post. First of all, here are the links:

• Know and Control Your Spending

• Why do Millionaires have Budgets?

• Three Ways to Track Your Spending

• Thoughts on Quicken vs. Microsoft Money

• Pretend It's Not a Budget: How to Create a 'Spending Plan' You Can Stick To

• Five Keys to Developing a Successful Budget

• Budgeting Part 1: Creating a Family Budget

• Budgeting Part 2: Living on a Family Budget

• Budgeting Part 3: Reduce Your Spending

Now for some resources. In the past, I've suggested that a viable budget tracking set-up could involve a combination of Quicken or Money and You Need a Budget (for more details see The Benefits of You Need a Budget and YNAB Question of the Month: How Does it Compare to Quicken and Microsoft Money?) and this is close to what I personally use (I use Quicken plus my own self-created spreadsheet).

That said, I've asked readers what they think about using Mvelopes as a budgeting option, and I've received very favorable responses. As such, I've been recommending Mvelopes for those who want an electronic version of the envelope budgeting system. Here are some links to help you consider their service:

• Compare to Microsoft Money

• Compare to Quicken

• Take a tour of Mvelopes Personal

• Financial Fitness Quiz

• Free Budgeting E-book

• Free Debt Calculator

• Get a FREE 30 day trial of Mvelopes Personal

My Confession: I'm Not Doing a Budget for 2008

Shortly after I wrote How We Budget, my plan was to put together our budget for 2008. As I started, I wondered why I should go to the trouble. After all:

• I rarely refer to the budget throughout the year -- having "ignored" the budgets I've done for the past several years.

• We have our spending completely under control. We're frugal and we track everything via Quicken. I look at how we're doing every month through a few Quicken reports -- why create another document simply for the sake of doing so?

• We have a good amount of surplus between what we make and what we spend, so there's plenty of room for error.

Early on in our lives, a budget was vital for us. It helped us pay off debts, start saving, start giving, and the like. It was one of the key documents we used to keep us on track. Now after 17 years, we've "got it" and have other (Quicken) ways to help us manage that essentially do the same thing as a budget. So why take the time to create one?

We'll see how this year goes and if need be, I'll do one for 2009. Otherwise, 2007 could have been the last year of budgeting for me.

The Money Blog Network is doing a group writing project on the issue of budgeting. If you'd like to read more on this topic, see these posts:

• Living On A Budget: Don’t Knock It Until You Try It
• A budget in your head isn’t really a budget
• A Free and Simple Budget Planner
• The Fine Art of ‘Reverse Budgeting’
• Actual vs. Budget Report, January 2008

It's Budgeting Time of the Year

This is a re-post of a previous piece of mine. I plan to run it a few times the next few weeks as a reminder to all to get those budgets done. ;-)

I'm well aware that the end/first of the year is the time that many people review last year's budget, develop new budgets for the next year, or start a budget for the first time. As such, I wanted to offer some links and resources on budgeting in this post. First of all, here are the links:

• Know and Control Your Spending

• Why do Millionaires have Budgets?

• Three Ways to Track Your Spending

• Thoughts on Quicken vs. Microsoft Money

• Pretend It's Not a Budget: How to Create a 'Spending Plan' You Can Stick To

• Five Keys to Developing a Successful Budget

• Budgeting Part 1: Creating a Family Budget

• Budgeting Part 2: Living on a Family Budget

• Budgeting Part 3: Reduce Your Spending

Now for some resources. In the past, I've suggested that a viable budget tracking set-up could involve a combination of Quicken or Money and You Need a Budget (for more details see The Benefits of You Need a Budget and YNAB Question of the Month: How Does it Compare to Quicken and Microsoft Money?) and this is close to what I personally use (I use Quicken plus my own self-created spreadsheet).

That said, I've asked readers what they think about using Mvelopes as a budgeting option, and I've received very favorable responses. As such, I've been recommending Mvelopes for those who want an electronic version of the envelope budgeting system. Here are some links to help you consider their service:

• Compare to Microsoft Money

• Compare to Quicken

• Take a tour of Mvelopes Personal

• Financial Fitness Quiz

• Free Budgeting E-book

• Free Debt Calculator

• Get a FREE 30 day trial of Mvelopes Personal

How We Budget

I thought some of you may be interested in the process we (my wife and I) use to budget. FYI, we've done this for years and have a bit more budget freedom these days than what we did when we first got married, so some of this won't apply to people just starting out on a budget, those deeply in debt, etc. who will need to monitor their spending very closely. Anyway, here's what we do:

1. At the end of the year, I look at what we've spent the previous year. Since I use Quicken to track all our spending, this is rather easy.

2. I set up a spreadsheet (by copying last year's model) that lists all our expenses and income sources.

3. I take the information from #1 and put it in the spreadsheet. I list income and expenses by month.

4. I make any needed adjustments. For instance, I may think some categories need more money and others need less. I make the appropriate changes.

5. I look and see where that leaves the bottom line. If I'm negative, I need to cut expenses. If I'm positive, I can save more.

6. Knowing I'm ok for the year, I go six months without referring to my budget. I have a general sense of what we have to spend each month on each category, but I don't hound myself or make daily comparisons to how my spending lines up versus my budget.

7. In July, I re-do the budget, updating it for the first six months of actual spending, then repeating steps #4 and #5 above.

8. That's it. The rest of the year is on auto-pilot.

As I said, we're a lot more relaxed now than we used to be. Early in our marriage I did monthly budget updates -- we had to since we had debt we wanted to pay off and didn't have any surplus income as a cushion. 

For more on budgeting, see these posts:

• Know and Control Your Spending

• Why do Millionaires have Budgets?

• Three Ways to Track Your Spending

• Budgeting Part 1: Creating a Family Budget

Tips to Make Budgeting Easier

MSN Money has a guide to budgeting that offers various thoughts on how to budget, why to budget, etc. The part I liked the best was the list of tips to make budgeting easier. Here's what they had to offer:

• Write it down. If you don't, you probably won't stick to it.
• When good fortune comes your way in the form of an "extra" paycheck or a bonus, pay an annual premium, make an additional mortgage payment or use it for seasonal extras, such as summer vacation costs or Christmas presents. (See "What to do with 'extra' paychecks.")
• If you can't spend less, earn more.
• Get into the habit of thinking ahead. If you know your situation is going to change -- a new baby, new winter clothes, a new job -- plan for it and try to pay cash.
• Remember, budgeting is the means, not the end. Keep spending "mistakes" in perspective.
• As your income climbs, don't splurge until you're sure you're staying ahead of inflation. A good budget grows with you, so it's worth re-evaluating your budget every year.

Ok, it's not rocket science, but neither is budgeting (budgeting is about as basic as it gets in personal finance.)

I think I'll write a post later this week detailing how we budget, but for now let me say all you need is a simple, written budget that you live by and check/adjust from time to time. If you do this, you'll be far ahead of most others and well on your way to a solid financial base.

For more thoughts on budgeting, see these posts:

• Budgeting Part 1: Creating a Family Budget

• Why do Millionaires have Budgets?

• Three Ways to Track Your Spending

And for those of you looking for budgeting help, you may want to consider this post: The Benefits of You Need a Budget.

It's Budgeting Time of the Year

This is a re-post of a previous piece of mine. I plan to run it a few times the next few weeks as a reminder to all to get those budgets done. ;-)

I'm well aware that the end/first of the year is the time that many people review last year's budget, develop new budgets for the next year, or start a budget for the first time. As such, I wanted to offer some links and resources on budgeting in this post. First of all, here are the links:

• Know and Control Your Spending

• Why do Millionaires have Budgets?

• Three Ways to Track Your Spending

• Thoughts on Quicken vs. Microsoft Money

• Pretend It's Not a Budget: How to Create a 'Spending Plan' You Can Stick To

• Five Keys to Developing a Successful Budget

• Budgeting Part 1: Creating a Family Budget

• Budgeting Part 2: Living on a Family Budget

• Budgeting Part 3: Reduce Your Spending

Now for some resources. In the past, I've suggested that a viable budget tracking set-up could involve a combination of Quicken or Money and You Need a Budget (for more details see The Benefits of You Need a Budget and YNAB Question of the Month: How Does it Compare to Quicken and Microsoft Money?) and this is close to what I personally use (I use Quicken plus my own self-created spreadsheet).

That said, I've asked readers what they think about using Mvelopes as a budgeting option, and I've received very favorable responses. As such, I've been recommending Mvelopes for those who want an electronic version of the envelope budgeting system. Here are some links to help you consider their service:

• Compare to Microsoft Money

• Compare to Quicken

• Take a tour of Mvelopes Personal

• Financial Fitness Quiz

• Free Budgeting E-book

• Free Debt Calculator

• Get a FREE 30 day trial of Mvelopes Personal

Save 10% on Budgeting Software Reminder

Just a reminder that the You Need a Budget 10% off coupon is still good. (click link for details)

That said, it only applies to the first 100 people using it, so you'll need to move quickly if you want to save some $$$$. Also, there's a full, 60-day guarantee, so if you're on the fence, it may be worth it to buy the software, save the 10%, and try YNAB. You can get all your money back if you hate it for some reason.

How to Record Cash Transactions on Quicken (And You Can Win a Free Copy of Quicken Premier 2008!)

This giveaway is now closed. See my comment below for the winner.

On my last post giving away a free copy of Quicken Premier 2008, I received the following comment about tracking cash transactions that I thought was worth sharing with all of you:

I created a separate cash account called "Wallet" to track my cash on hand. An ATM withdrawal takes money out of my checking account and puts it in my wallet, so in Quicken it is simply tracked as a transfer from my Checking account to my Wallet account, not an amorphous expenditure. I then track the bills that are in my wallet, with any loose change coming out in the wash (figuratively, though sometimes literally!). The key, though, is that when spending cash I try to use up the coins in my pocket first.

So if I withdraw $20 from an ATM, then I transfer $20 from Checking to Wallet. If I spend $2.50 of that, that actually leaves me with $17 in my wallet (and 50 cents in my pocket), so I stick the receipt in my wallet and later record it as a $3 expenditure from the Wallet account. If I later want to buy something for $1.50, I can cover the 50 cents with the coins in my pocket so I only have to take $1 from my wallet, thus getting recorded as a $1 expenditure from the Wallet account and accurately leaving me with $16 in the Wallet account.

I find that this:

• Gives me adequate insight into small expenditures without becoming an undue accounting burden
• Encourages me to be slightly more efficient with cash expenditures (ever notice how something priced at $9.10 often ends up costing you $10.00, since you may not have a dime handy and the change gets misplaced?)
• Subtly provides a small disincentive to take dollars out of my wallet (since I know I'll be accountable to myself when I fire up Quicken, it becomes sort of a weird mind game to keep the dollars in there).

None of this is particularly earth-shattering, but it's the "small leaks," y'know?

Good idea for those of you looking for a way to track cash spening in Quicken.

Now, on to a giveaway!

I have three copies left of Quicken Premier 2008 that I'll be giving away over the next three weeks. Here's how you can have a chance to win the giveaway this week:

1. Leave a comment below -- any comment.

2. Sometime in the next week, I'll stop by the post, stop the submissions, and name the winner.

3. It will be that person's responsibility to check back to see if they are a winner and then email me their contact information.

4. I'll send the winner a link to download a free copy of Quicken Premier 2008.

A few rules for these giveaways:

1. You can not win more than one prize.

2. I will be the complete and final judge.

3. Legal disclaimer: I can not guarantee safe delivery of the items. I'll send the prizes via email and since they come from Quicken, they should be fine, but since I can't control the links I won't be held accountable if there's a mess up.

4. If you win something and do not contact me within a week of winning, I reserve the right to give your prize away to another winner. Note again: I won't track down the winners -- it's your responsibility to come back and see if you won.

5. Local laws, rules, and regulations apply.

Good luck! Post a comment below for your chance to win!

Simple: How to Budget and Fix Your Cashflow!

I'm on vacation. The following is a guest post courtesy of www.estrategiasfinancieras.com:

I believe that often people make budgeting out to be a bit more complicated than it really is, or creating a money tracking system a bit of a science. This couldn’t be further from the truth.

It’s Easy!

The Secrets to a Budget

Just remember this: Your income must be equal or greater than your expenses plus your debt.   I > E + D

This is the science: Always remember the total of everything you owe, so you can know the maximum amount you can spend on everything else.

In other words, if you earn $1000, your payments on debt and expenses totals $800, you only have to make sure you don’t spend more than $200 (I’d advice not wasting over $100 but that’s up to you), that’s it! You just have to know how to add and subtract, I know you know how to do at least those two.

How to Take Care of Your Money

1- Track your money.
2- Find the waste.
3- Stop the waste.
4- Redirect the waste.
5- Keep tracking.

• TRACK YOUR MONEY -- If you don’t know what you are doing wrong, you can’t know how to fix it. Unless you have in front of you ALL your money transactions so you can see what you spend and what you waste, you won’t know how to fix it. Unless you know where you’re wasting your Money you’ll never know where it’s disappearing to. Isn’t this one of the biggest problems when it comes to money management? Where did my money go? When you learn how to track your money, you’ll see how much you waste on little things (and sometimes not so little), that keep you from saving and reaching your financial goals.

• FIND THE WASTE -- Waste is what you spend on non-important stuff: McDonald’s, excessive movie rentals, eating out for lunch instead of bringing a sack-lunch, a coke here and a sprite there, etc.

• STOP THE WASTE -- This is quite simple, once you find what you are wasting so much on, stop doing it. This is the money you’re losing that you could be using towards your savings or pay down debts. Yes, the waste is what makes saving impossible.

• REDIRECT THE WASTE -- I am not saying throw your life away into a saving bliss, that’s not it at all. There’s nothing I am more against that becoming a tightwad and have a boring life trying to save every penny possible. What I am saying is that instead of frittering all your money away, you use redirect that money in better and more useful ways, maybe like this: Part of it goes into savings, part of it towards your debt or a small investment fund, part of it goes into having fun or give yourself an allowance that you can use towards having fun but once you’re out of that money you cannot go back for more, the point is not to have fun, just to control how much you pay for it.

• KEEP TRACKING -- Develop the habit of tracking your money daily. Every good successful business does it, in bad times, but also in good times and with great discipline. Unless you keep tracking your money, you will lose good habits, and a lot quicker than you think, then before you know it you’ll be back in the same financial trouble.

Why Having a Budget Is the First Step to Getting Out of Debt

The following is a guest post. See the end of the article for author information.

Many people constantly complain about being in debt, but when you ask, “Do you have a budget; Do you know how much you owe,” or when you suggest they cut back on expenses they look at you as if you are speaking a foreign language, or they just plain out refuse. I am always amazed at this, how can you ever get out of debt if you don’t change your mindset or if you aren’t willing to work hard and make sacrifices? There is no quick fix or cure-all to get out of debt. It takes a long time to get in debt, and you will not get out of debt overnight.

Many people do not know how to create a budget for themselves and many don’t even know where to start. Luckily, I was taught at an early age how to create a budget for myself. I knew how much money I spent and how much I had left. This skill helped me when I became an adult and got into debt. How did that happen, you say? Well, although I knew how to budget my money I didn’t have a clue about how credit cards worked. I thought it was free money, but that is another article.

Anyway, the first step to getting out of debt is creating a budget for yourself. The basic premise for creating a budget is to know what you have coming in and what you have going out, in other words, how much money you bring home and how many expenses you have (creditors, loans, utilities, cell phone, day care, dry cleaners, etc.). Make the budget flexible so you have room for unexpected expenses such as house repairs or car repairs. If you don't have an emergency fund or savings to cover these expenses, you can readily see in your budget areas where you can reduce your expenditures to get money to pay for those unexpected items.

Having a budget makes you responsible and accountable for your finances. Most people don't think about how much money they spend per week or per month, but when you write all of your expenses down on paper it provides awareness of your spending habits.

Once you create your budget you can easily see if you have too many expenses or if your money is not being managed properly. The easiest task to accomplish is determining if you have too many expenses, you simply cut down on your expenses and you will have additional money. To pay down some of your debts, some expenses you can reduce include:

* bringing your lunch to work
* canceling your pager, cable or cell phone service or get the cheapest plan available
* carpooling, or catching the subway or bus to work
* using coupons when buying groceries or shopping at wholesale stores like Costco or Sam’s Club
* selling unused items at a yard sale or donating to charity.

If you are mismanaging your money, or spending your money on wants instead of needs, that is a little harder to overcome because this takes willpower and discipline. It takes 23 days to develop a habit so you have to practice good spending habits every day. Each week it will get easier and easier. It also helps to develop financial goals for yourself, such as you want to get out of debt within a specific time period, you want to buy a house, take a vacation - whatever your goals are write them down and give yourself a target date.

Don’t get alarmed if you miss your target date for a financial goal because your main focus is changing your spending habits. Remind yourself that you are working toward achieving your goals. It may take some time, but I know you can do it. Being debt-free is worth the hard work and discipline required. Financial freedom is so sweet. Just think how nice it would be to wake up each morning not worrying about having to pay a creditor, not worrying about creditors calling your house asking for a payment, being able to see yourself in a house, or buying investment property or taking a vacation every year.

So many things are possible when you are debt-free and live on a budget. I make a decent salary and only have one bill, my mortgage, and I still put myself on a budget every payday. Sometimes people ask, “Why do you worry about money?” and I say I always liked to be prepared, because you never know what may happen.

Harrine Freeman is the CEO of H.E. Freeman Enterprises, a credit repair and personal finance services company. She is a member of the American Association of Daily Money Managers, a credit repair expert and the author of, "How to Get Out of Debt: Get an ‘A’ Credit Rating for Free Using the System I’ve Used Successfully with Thousands of Clients.” For more information visit http://www.hefreemanenterprises.com.

What Personal Finance Software Do You Use?

I was thinking about personal finance software the other day (yeah, I know, my life's REALLY exciting) and thought I'd ask you all what you use and recommend. I'll start with what I do.

For years (probably about 8 to 10 years now) I've been a Quicken user. I use it to track my expenses, investments and net worth. I found early on (it may be different now, I haven't tried it recently) that the budgeting part of Quicken wasn't as flexible as I liked, so I developed my own spreadsheet budget system.

I tried switching to MS Money several years ago (it came free on a computer I bought), but I couldn't get the transfer of data to work from Quicken to Money, so I stayed with Quicken. I'm glad I did as I've heard since then that MS Money is not that great. I'll be interested to see what you all think of it.

So, what do you use? Here are some options I'd consider to be in the "top level" of personal finance software -- maybe you can introduce me to more:

• Quicken

• MS Money

• You Need A Budget

• Mvelopes Personal (FYI -- Compare to Microsoft Money and Compare to Quicken)

Do you like what you use? Why or why not?

Why You Need a Budget

A couple weeks or so ago I held a You Need A Budget giveaway where commenters listed their top reasons we all need a budget. Since then, I named the winners. Because very few of you probably read all 37 entries, I thought it was appropriate to share the winning comments since there are some great reasons why we all need a budget. First, we'll start with the grand prize winner, Scott:

You need a budget because building wealth is not possible without self-discipline.

A budget is an essential tool for setting goals; establishing reasonable boundaries that are necessary for meeting those goals; and measuring your performance and holding you accountable to those boundaries. If you lose ground, a budget will alert you to this fact, and you can adjust your budget to compensate. If you exceed your goals, a budget gives you some freedom to enjoy any excess you are blessed with.

A budget is an essential tool for exercising financial self-discipline!

And now for the five runners-up (in alphabetical order). From Arme L:

In life, we have to plan for many things to succeed. To pass an exam, we study. To win in a game, we practice. To be financially stable, we need a budget. Even corporations and our government need a budget to function.

Budgeting helps us manage limited resources (our money) to fulfill our unlimited wants (our demands).

Everyone has wants, so we all need a Budget!

Did he just mention "budget" and "government" in the same sentence? How'd he win? ;-)

Here's what Ben submitted:

Budgets are a pact between your current self and your future self on how you plan on living your life.

Ohhhh. A little philosophical there, huh? I like it!

Next, here's Blaine:

Without a budget, you will find it very difficult to save for your future or to fully enjoy your present. Budgeting allows you to make sure that you are spending less than you earn, and it also allows you to spend money without having to worry about whether or not the expense is going to interfere with your future. If you set money aside for frivolous expenses, then you can fritter that away on anything you want without being kept up at night. You will still have a nice nest egg when you are ready to change careers or retire.

Here's what Charles had to say:

I spend too much time away from my family and put in too much hard work earning money to allow it to simply walk out the door without a prioritized, assigned purpose.

And finally, Jana weighed in with this:

You Need a Budget because without it you end up with all the latest DVDs, books and designer clothes looking cool for the year. Your kitchen is stocked with more equipment than the best seafood restaurant in town. You are well known to all the hostesses at the 5 star restaurants and your new car has all the newest gadgets and the most beautiful paint job in the world. And as you sit in your amazing Martha Stewart decorated home, surrounded by all the coolest things; it's hard to see them when the lights are shut off. It's hard to appreciate them when they are being hauled away by the IRS. And one day, when you are stuck in the county assisted living facility; parked under a tree for 8 hours in the 100+ degree heat, you can reflect on why you have no money left to help with your bills you can say, well, I wanted the see Shrek in HD! BLAH!

VERY FUNNY!

And finally, as if you already haven't heard enough about budgets, here are some thoughts from me:

• Know and Control Your Spending

• Why do Millionaires have Budgets?

• Three Ways to Track Your Spending

• Pretend It's Not a Budget: How to Create a 'Spending Plan' You Can Stick To

• Five Keys to Developing a Successful Budget

Solve Marriage Spending Differences by Having a Personal Account

Here's a piece from Kiplinger's that gives "Secrets to Marital and Money Bliss." (Yeah, right.) The article does have some good tips on how spouses can handle spending differences including the following:

Another solution [for managing spending conflict in marriage] is to allow each of you a slush fund to spend as you wish, with no questions or recriminations. Or agree that on purchases above a certain amount -- say, $500 or more -- you'll consult with each other before buying.

I've talked before about how my wife and I discuss major purchases before we make them, but I don't think I've discussed the other idea, though we do do it. (whoops, did I say do-do?) ;-)

Sorry, the 10-year-old in me took over for a bit.

Anyway, my wife and I have what we call "personal accounts." These are budgeted-for spending categories ($600 per year) that each of us can spend on anything we like without asking the other person and without getting the snide comments that might happen otherwise. I spend mine on bike and rose stuff while my wife buys books (I get all the books I can read free thanks to this blog and my library), dinners with friends, and gifts for various acquaintances. I always spend my entire amount every year -- my wife hardly ever spends all of hers, and she ends up giving it away at year end.

This system has worked extremely well over the 10 years or so we've used it. It keeps her from commenting negatively on the stupid things I buy (in her mind they're stupid) and keeps me from the same. I'm not sure how many arguments our personal accounts have helped us avoid, but I know it's a ton. I heartily recommend this sort of set up for those of you looking how to establish some spending flexibility for each partner in your marriage.

Users Love You Need a Budget

I got several positive comments on You Need A Budget from my post titled You Need A Budget Pro Now Imports Files from Banks. I thought I'd share them with you. Here's the first one:

YNAB Pro is an incredible program that gave us control over our finances (see FMF's previous post about that). If you are just starting to get control of your money you definitely want to check this out. It is a wonderful tool that has helped my wife and I really get ahead financially.

Yes, I've written about You Need A Budget several times before. Not because I use it (I don't -- I use a self-made version of Excel for budgeting and Quicken for tracking) but because I keep getting positive comments from users on it.

Here's another one:

I also wanted to add that my lovely bride and I use YNAB Pro and heartily recommend it. I had been tracking finances with a very complicated (but powerful) spreadsheet that I written for a very long time, but when YNAB Pro came along, I thought I'd give it a shot. It works beautifully for zero-based budgeting, and fits our needs perfectly.

I wish it had some more in-depth reporting capabilities (I'm a big data person), but it's a great tool for both beginning budgeters and long-timers like me.

And another one:

YNAB Pro is incredible. It is perfect at what it does. Keeping you on a budget and helping you get ahead. I recommend it fully.

I'm glad that people are finding You Need A Budget to be a useful tool. In the end, I think the best option for budgeting is using whatever works for you -- You Need A Budget, Mvelopes Personal, Quicken, Money, paper, etc. As long as you use SOMETHING, you'll be much., much better off than most people.

You Need A Budget Pro Now Imports Files from Banks

Here's part of an email I recently received from Jesse, the guy who runs You Need A Budget:

Just wanted to give you an FYI that YNAB Pro now imports downloaded files from banks. That seems to be the criteria for some people to deem a program worth their time, so I thought maybe I'd pass that on to you so you could tell your readers. I'm getting a very good response with the upgrade.

In fact, You Need A Budget (the Pro version) has a ton of recent upgrades. If you want a detailed list, click this link.

You Need A Budget is one of the three budgeting tools I use/recommend. I personally use Quicken and a homemade spreadsheet (for budgeting) since I've done so for years. But I also recommend You Need A Budget and Mvelopes Personal based on positive responses I've received about each of these from readers. To see some of these thoughts, visit these links:

• Mvelopes Seems to be a Winner (At Least for Most People)

• The Benefits of You Need a Budget

• Another Glowing Recommendation for Mvelopes

• YNAB Question of the Month: How Does it Compare to Quicken and Microsoft Money?

The First Step in Taking Control of Your Expenses

Here are some thoughts from the book The Net Worth Workout: A Powerful Program for a Lifetime of Financial Fitness (see my rating for details) on the first step in taking control of your expenses:

Just as being aware of what you eat is the first step to controlling your diet, being aware of exactly what you spend is the first step to taking control of your expenses. You'd be surprised how little people actually know about their spending habits. I often hear clients say things like "I don't need much, " or, "Aside from necessities, I really don't spend at all." Then, when I question them more closely, I discover that they spend much more money than they think, and that a very large proportion of their spending is for nonessentials.

How true!

How can anyone make any sort of meaningful financial progress without a budget, spending plan or whatever you want to call it? Certainly some people do live and do "ok" without a budget, but are they really making the most of their money? I don't think so.

We've had a budget for our entire married life (15 years) and we've tracked our expenditures by Quicken for 7-10 years or so now. Doing so has helped us plan, make decisions, adjust to unexpected circumstances and control our spending. I consider having and using a budget to be one of the cornerstones to growing your net worth.

For more thoughts on budgeting, see It's Budgeting Time of the Year. It has several useful links to some of my top budgeting posts.

How Much Should I Be Spending on Groceries Every Month?

As I was looking at my historical budgets the other day, I saw something interesting. We've spent $400 per month on groceries for about the past five years. It's a steady number, not varying much from month to month. That makes budgeting easy. But then I began to wonder...

How does this compare to what I SHOULD be spending on groceries? For a family of four, is $400 good, bad or average? I'm not sure. As a percentage of our income, it's a small amount, but that doesn't tell me much either.

So I'm asking you: how much should I be spending on groceries every month? Leave your thoughts below -- I'd appreciate the input.

Daily Habits Determine Your Financial Success

Here are some thoughts from the book The Net Worth Workout: A Powerful Program for a Lifetime of Financial Fitness (see my rating for details) on how daily habits determine your financial success:

Just as an unhealthy diet can lead to serious health problems such as heart disease, strokes, and cancer, a disorganized spending program can lead to serious financial problems, like having to work more years than you would like, having limited choices in where you send your children to college, and even being unable to afford good health care. And just as it is with your physical health, these long-term implications are driven by your daily habits.

So true. It's what you do on a day-in, day-out basis that really determines whether your net worth grows or not. All of those (seemingly) little financial decisions/purchases add up and ultimately become your financial life. If you are disciplined and have control over the daily money issues in your life, then it's likely that your net worth is growing. If you don't, then you're probably treading water at best.

Control of your daily spending starts with having a budgeting system, keeping it up-to-date, following it, and using it to make on-purpose financial decisions (versus simply making them haphazardly.) If you don't have such a system, I suggest you check out It's Budgeting Time of the Year. This post is full of suggestions on budgeting as well as some budgeting services that can help you get control of your finances.

Mvelopes Backs Up Its Product

I personally do not use Mvelopes Personal. I've used a combination of Quicken and Excel (for budgeting) for years and it's working well for me. That said, I've had readers rave about Mvelopes Personal and how it's helped them with their budgeting. So I've recommended the product based on their thoughts.

But then there was a negative comment from a reader -- found on my post titled Mvelopes Seems to be a Winner (At Least for Most People). Here's what Martin had to say:

Mvelopes does actually support all of the institutions advertised as supported. It's a concept I had been waiting for, but was severely disappointed when all three of my institutions were not supported in spite of being listed. Customer support actually told me one of the institutions hadn't been available for over a year and likely would never be available. At the end of the trial period I still had no access and was billed for a one year subscription. When challenged with the fact I still had no access for "supported" accounts, I was more or less shown the door.

Great idea, ethically questionable marketing and management.

Oops!

It's when a person has a problem with a company that they find out whether the company is any good or not -- whether it takes care of its customers or if it's only in business for itself. Here's the next comment left on that post:

Martin... I am the CTO of In2M, the makers of Mvelopes. I apologize that you had a bad experience with both the technology and your account.

We use aggregation technology to gather financial transactions data on your behalf and present the data in the Mvelopes application for you to manage. Sometimes that link will break and we need to update it. We typically fix broken links within 2-4 days. If your account links were not fixed in a timely manner, an escalation of your request for refund should have been considered. Please email us at customer.service@mvelopes.com and include "Dispute Resolution" in the header of the email to escalate the request... also, please mention this link in your escalation request.

Wow! Now that's a company I want to do business with -- one that backs up their product. The way things are these days, I'm always surprised when a company does something to make a bad situation right and I'm glad Mvelopes is one of these. It makes me feel better about recommending them.

For those of you interested, here are some links to help you consider their service:

• Get a FREE 30 day trial of Mvelopes Personal

• Compare to Quicken

• Compare to Microsoft Money

• Take a tour of Mvelopes Personal

• Financial Fitness Quiz

• Free Budgeting E-book

• Free Debt Calculator

How We're Budgeting for Our Disney Trip

A couple weeks ago I wrote We're Going to Disney World, Want to Help? and said I'd be discussing how we plan to budget for this trip. So here goes...

Right now, I have a "plug" figure in our 2007 budget. I have no idea how much this trip will cost us (we're still researching options, alternatives, etc. -- we've checked out tons of books from the library and are doing some online investigating as well -- plus I got some great tips on my original post) so it's a pretty big plug -- it should be a lot higher than what we actually need.

As we start to decide when we want to go, where we'll stay, etc., we'll get some more firm numbers. I'll then put these new/lower numbers into our budget and we should be good to go.

One more thing -- we won't budget to the penny and we won't obsess about costs once we get there. Here's a bit more detail on this line of thinking:

We'll get a good estimate of what we think it will cost, then add an extra 10-15% just for cushion. Unexpected expenses are bound to pop up, we may want a few extras here and there or we may want to splurge a bit. Hence the extra budget amount.

This extra amount also keeps us from obsessing (as I call it -- my wife calls it "spending wisely") over every little expense while on vacation. We're on vacation and I want to enjoy it, not worry about how I'm going to save a penny here and a penny there. Sure, I want a good deal on our trip, but if I'm thirsty and want a $2 Coke, I don't want to get into a big fight about the cost of Cokes at Disney versus at our local grocery store.

We used this approach on our trip to Aruba and it worked wonderfully. We had a great time, no stress about spending money, and we actually spent a good amount less that what we budgeted. So we're using the same philosophy on our trip to Disney. The one thing that's changed: we now have kids. We'll see if they throw a monkey wrench into everything. ;-)

It's Budgeting Time of the Year

This is a re-post of a previous piece of mine. I plan to run it a few times the next few weeks as a reminder to all to get those budgets done. ;-)

I'm well aware that the end/first of the year is the time that many people review last year's budget, develop new budgets for the next year, or start a budget for the first time. As such, I wanted to offer some links and resources on budgeting in this post. First of all, here are the links:

• Know and Control Your Spending

• Why do Millionaires have Budgets?

• Three Ways to Track Your Spending

• Thoughts on Quicken vs. Microsoft Money

• Pretend It's Not a Budget: How to Create a 'Spending Plan' You Can Stick To

• Five Keys to Developing a Successful Budget

• Budgeting Part 1: Creating a Family Budget

• Budgeting Part 2: Living on a Family Budget

• Budgeting Part 3: Reduce Your Spending

Now for some resources. In the past, I've suggested that a viable budget tracking set-up could involve a combination of Quicken or Money and You Need a Budget (for more details see The Benefits of You Need a Budget and YNAB Question of the Month: How Does it Compare to Quicken and Microsoft Money?) and this is close to what I personally use (I use Quicken plus my own self-created spreadsheet). That said, I've asked readers what they think about using Mvelopes as a budgeting option, and I've received very favorable responses. As such, I've been recommending Mvelopes for those who want an electronic version of the envelope budgeting system. Here are some links to help you consider their service:

• Financial Fitness Quiz

• Free Budgeting E-book

• Free Debt Calculator

• Get a FREE 30 day trial of Mvelopes Personal

• Compare to Microsoft Money

• Compare to Quicken

• Take a tour of Mvelopes Personal

It's Budgeting Time of the Year

This is a re-post of a previous piece of mine. I plan to run it a few times the next few weeks as a reminder to all to get those budgets done. ;-)

I'm well aware that the end/first of the year is the time that many people review last year's budget, develop new budgets for the next year, or start a budget for the first time. As such, I wanted to offer some links and resources on budgeting in this post. First of all, here are the links:

• Know and Control Your Spending

• Why do Millionaires have Budgets?

• Three Ways to Track Your Spending

• Thoughts on Quicken vs. Microsoft Money

• Pretend It's Not a Budget: How to Create a 'Spending Plan' You Can Stick To

• Five Keys to Developing a Successful Budget

• Budgeting Part 1: Creating a Family Budget

• Budgeting Part 2: Living on a Family Budget

• Budgeting Part 3: Reduce Your Spending

Now for some resources. In the past, I've suggested that a viable budget tracking set-up could involve a combination of Quicken or Money and You Need a Budget (for more details see The Benefits of You Need a Budget and YNAB Question of the Month: How Does it Compare to Quicken and Microsoft Money?) and this is close to what I personally use (I use Quicken plus my own self-created spreadsheet). That said, I've asked readers what they think about using Mvelopes as a budgeting option, and I've received very favorable responses. As such, I've been recommending Mvelopes for those who want an electronic version of the envelope budgeting system. Here are some links to help you consider their service:

• Financial Fitness Quiz

• Free Budgeting E-book

• Free Debt Calculator

• Get a FREE 30 day trial of Mvelopes Personal

• Compare to Microsoft Money

• Compare to Quicken

• Take a tour of Mvelopes Personal