A Budget That Works

I’ve spent years now pondering how to make a budget that actually works and stick to it. I think I’ve finally got the most efficient method figured out.

The secret to a budget that works is it needs to accurately reflect your existing spending patterns rather than force you into new ones. (At first at least, you can start restricting some categories if you’re spending too much.)

My old way was to track every single penny in Quicken by manually entering every transaction. It worked but it was hard to keep up with, especially as I accumulated more and more accounts (high yield savings, IRA, 401k, etc). Once I had everything in Quicken and had a full month or more of data I could see the real picture of how much I was spending in each category. This method worked great until I got too busy to maintain my Quicken file on a daily basis, I got a couple months behind and I’ve got no chance of ever catching up now.

Recently I discovered mint.com. Mint is great because it keeps track of all your accounts and all your transactions for you. It even automatically categorizes them (you may need to help it do this a bit at first but once you tell it how you like things sorted it remembers). After you have everything categorized you can easily create a budget from your past monthly averages in those categories and then modify them as you see fit. Mint is especially effective for me because I try to put all of my purchases on my credit card (which I pay off every month) so that I get the rewards points – because of this nearly all of my purchases are automatically imported.

The best thing about Mint is the way you can then visualize your budget. It has a bar that fills up as you spend in each category and it has a mark on that bar that shows how you’re doing proportionally to how much of the month has past – this is great for areas that I spend only a bit at a time on like eating out and entertainment. If I’ve passed the mark I know I need to hold off on spending more in those areas until the mark catches up.

The only thing I don’t like (which I hope to see soon) is the inability to budget for expenses that come up less often than monthly like car insurance (I pay 6 months at a time to get a discount) and travel. What I’m doing for now is breaking out how much I want to save for those each month and including them in my budget so I remember not to spend that money.

Disclosure: Some links in this post are affiliate links.

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