Laura, Author at The Humble Broker

The Easiest Way to Start Budgeting: How Mint.com Puts You On The Path To Personal Finance Nirvana

I love the convenience of the plastic card that you can swipe and pay for almost anything, anywhere, including drive thrus. But it’s also a really good way to swipe, swipe, swipe your entire income away. That’s why I started using the free (I love that word!) budgeting services of Mint.com about 4 years ago. It helps me keep track of my spending by uploading and categorizing my transactions automatically and also works as a great budgeting tool. Throughout the month it reminds me and alerts me as often as I want (sometimes TOO often!) when I’ve gone overbudget or forgotten a bill. It’s a really great tool that I have shared with a lot of close friends and family members to help them run their finances instead of having their finances run them.

The Card is Too Easy

Sometimes I get so frustrated with how easy it is to swipe the plastic cards we carry around in our wallet. I used to wish I could work on a “cash only” basis. The plan was to allot at the beginning of the month the amount I was going to spend in each different category of my life. I would put the amount in cash into separate envelopes. Then, during the month, I would use the cash from the envelopes and have a very physical way of seeing how much I had left in the envelope for each category. That way I would not overspend and I would always be living within my means.

After assessing it, the cash in the envelope system was too time consuming and impractical for our family. So I went in search of an online budgeting system that would basically do all that with me and allow me to follow my same goal of living within my means, and to save for bigger goals, like buying a home.

There are Many

After sorting through the dozens of online budgeting tools, I have found two that I have used and I will review them both. (link the YNAB review here) I hope it can help you to use your money in the smartest way possible, thereby allowing you to have money for the things you actually need and want, and not just swiping your card here and there for every material possession you see and convince yourself that you need in that moment.

Need Vs. Want

If you are serious about living by a budget, even if it’s a loose budget, it’s important to know the difference between needs and wants and to practice self-control. A lot of times we justify our purchase by how little it costs. Even if the item is only $1, if you can take a few seconds to think about where that $1 purchase will fit into your budgeted categories then it can help you decide if you really need that item or if it would be better to use that dollar later for something you actually need. A lot of small, unneeded purchases can add up to hundreds and thousands of dollars each year. So be honest in your decisions about needs and wants.

Confession

I don’t love budgeting, and I’ve had to learn and practice hard the principle of forgoing useless wants in order to save for greater wants and needs. I don’t love entering data into spreadsheets and tracking my spending in my check book. That’s why I loved the automatic system that Mint.com uses in pulling all your transactions and categorizing them for you. It saves time and does the mundane tasks for me and lets me be more a “manager” of my money instead of just a “book keeper.”

Is Mint the right tool for you?

If you can answer “yes” or “probably” to at least 7 of the following 10 questions then Mint.com would be a great tool for you:

1. I want to have more money but don’t want to go get a part time job

2. I would like to set up a budget and tracking system for my finances

3. I wish I could live within my means

4. When I get my credit card or bank statement I often feel surprised at how many purchases I’d made and forgotten about.

5. I don’t have a lot of time to put toward budgeting but I see the value in it

6. I prefer using free services, if they actually offer a good product, instead of paid services

7. It helps me to have reminders to keep me on track with my goals

8. I’m not an accountant and therefore don’t know much about booking journal entries or bookkeeping

9. I would like to use my money for more than just my monthly bills/expenses, ie…to save for a home or a big vacation or for investments

10. I think graphs and charts are a cool way of understanding data

Here is what I love about Mint.com

1. It is SAFE and SECURE which gives you peace of mind because it links to all your account and is updated daily. This is what takes up 90% of the work of budgeting. By using Mint.com, all you have to do is go through and make sure it is categorizing your transactions correctly and fix the few errors it makes and you are done. You don’t have to be bookkeeper and know the intricacies of credits and debits and their different columns. Mint is your bookkeeper.

2. It gives you a summary on the front page/Overview tab that shows all the amounts of your different accounts, and it is updated hourly/daily. It will tell you how much cash is in your checking and/or savings account(s), how much you owe on your loans, how your investments are doing, what your transactions for the months are, what your debt is. It also lists your assets and shows you what your net worth is after taking all the above into consideration. It’s a really good overview of your finances all in one place! Just one login name and one password and your whole financial overview is there before you.

3. You can use it’s filters to select how often you would like alerts and what to alert you on. For example, when you’ve gone over budget in a certain area, Mint.com will send you an email. When you’ve been hit with a fee, Mint.com will send you an email. Like I said, it’s like your own, personal bookkeeper keeping track of your money!

4. It categorizes your transactions automatically and also allows you to overwrite any allocation to make sure all your expenditures are categorized correctly, thus giving you the most accurate overview of your finances.

5. You can use it as a budgeting tool and also a tracking tool. While it’s important to know where your money is spent, it’s also important to set rules for yourself on how you are going to spend your money. That’s where the budgeting tool is handy. Although most of us don’t like budgets, they are like any rules; they protect us. In this case, they are protecting us from ourselves and our overspending! The budgeting tab/tool is very user friendly and easy to customize to fit your exact needs.

Still not convinced you’ll love Mint? Well, here are some more things to get excited about…

1. It uses cool, interactive graphs and charts that help you see, in a fun and useful way, exactly where you stand. For example, one chart gives you an overview of your spending and breaks it down into categories. You can then click on any one of the categories in the graph and it will show you each transaction that contributed to that amount. Very easy to use and you can even create your own charts based on the data available.

2. It helps you keep track of your upcoming bills that are synched to the site, ie, credit cards, loans, etc. It can send you an email telling you that you have an upcoming bill due.

3. You can use it for long term savings goals; ie…for a home, for travel, for rainy day fund. It helps you determine what you can afford and what smaller goals to set along the way to reach your larger goals. It will tell you if you’ve gotten off track! It will walk you through each smaller step in order to reach your larger goals, such as purchasing a home.

4. It helps you learn more about investing and understanding that using your money for enjoyment is better than just using it to pay your bills. It recommends services such as

5. It has free mobile apps so you can even access it on the go

The Best Thing:

You don’t have to be an accountant or familiar with booking journal entrie s in order to run your personal finances and track your expenses. Mint.com does it for you. While it is true that you can get an account and start getting set up within minutes, you should expect it to take a few hours to get all your accounts linked to the site, depending on how many accounts, assets, credit cards, loans etc. that you have. And it will take some weekly diligence in the first few months and then regular checking in thereafter to make sure your transactions are being categorized correctly. But it’s really a low maintenance budgeting and tracking system, which is really nice during busy times or if budgeting and finance aren’t your passions!

Tools of the Trade

Because it a financial tool, the operators are tapped into the market and they offer a lot of great tools you can use besides the budgeting and tracking tools. Mint.com can help you

1. Find ways to save, ie…through accounts and credit cards that offer the best rewards

2. Know if you should rent or buy, using their market indicators

3. Know some great home buying secrets

4. By offering tax tips for first time homebuyers

5. Understand home loans

6. Understand interest rates

Of course, it’s not perfect

The biggest flaws are in the budgeting and goal setting tools. It is not as customizable as other, more labor intensive budgeting software/websites. For instance, if you have $5000 you owe on a credit card that you plan to pay off in three months from now when you get your bonus, but you can only pay a minimum payment of $100/month for the next two months, the goal tool does not allow you to break it up and set future payment plans. It calculates your goal based on what you are paying on it now and sets a projected goal met date based on that.

More Serious Budgeting software

The best thing about mint.com is that it is for those of us who are busy and who are not financial experts but still want to track our spending and live on a budget. But since it’s budgeting tool isn’t as in depth and customizable as other budgeting software, it might not be the right thing for you if that is what you are seeking.

The Best Resource For Serious Budgeting: YNAB Review

Remember the song from the 90’s entitled, I Wanna Be Rich? The chorus about sums it up for most people, “I want money, lots and lots of money!” Having lots and lots of money isn’t always about earning lots and lots of money, it’s about using your money the right way. You can never earn more than you can spend. Using a budget in your personal finances can help you have more of the money you earn, instead of spending every dollar you make and living pay check to pay check. There are a lot of different personal financial management tools to help track spending, like Personal Capital and Mint. In this review I will cover a tool that is a little bit different because its focus it puts the budgeting process first and the tracking of expenditures second. While there are a few different budgeting tools, YNAB (You Need A Budget) is the one that has the tightest focus on what its niche.

Budgeting

I know most people hate the word Budget. Well, OK, so there are the financial planners and accounting geeks that are enamored with budgets, but for most people it sounds constricting and makes us want to immediately break free of any chains that it might use to tie us down. Honestly, I don’t love budgeting, but it is an essential aspect of any financial plan and I recognize that with a budget frees you from the bonds of debt and living paycheck to paycheck.

A budget can be something as simple as a piece of paper with your inflows and outflows on it, columns for categories and rows for goals. Another way to keep track of your money is through spreadsheets. I have used Excel for many years to keep track of our bills and expenditures. But merely keeping track of how you are spending your money isn’t budgeting. Because we are all “plugged in” so much every day and everything can be linked together, online budgeting tools are becoming better and better and more popular.

YNAB’s Four Rules of budgeting

Many online budgeting sources use phrases such as “create your personalized spending plan.” Focusing on how to spend your money will never help you have “lots and lots” of it. It’s bad advice. YNAB redirects you and teaches you four basic rules that change your spending and improve you budgeting.

1. Give every dollar a job

2. Save for a rainy day

3. Roll with the punches

4. Live on last month’s income

If your money has a job then it is working for you instead of controlling you. Don’t be fooled; budgeting is work. YNAB is a great program but takes time and effort to keep it updated. There are automatic filters built into the program that can help allocate your spending quickly but for the first month or two you have to really consider it a part time job and keep up with it in order for those filters to work correctly thereafter.

How it works

Getting an account with YNAB is pretty fast and easy. It is a program you buy and download for $60. However, if you are not sure you want to commit to it or if you are even going to like it, they have a free trial period that lasts for 34 days. It’s a really good offer. You can set up your account and get your budget rolling and decide after the first month if it’s going to be a good tool to help you manage your personal finances better.

Setting up your account takes time

Getting an account and setting up your account are two different matters. Plan on it feeling a bit time consuming for the first month or two. That is usually the part that scares most people off. “I don’t have the time to budget” they say. But they want more money. So maybe they consider getting a part time job. That would bring in more money, but in the end I guarantee they won’t feel like they have more money. Instead, if they learn to budget, save and invest their money it will be like the money is working the part time job instead.

Getting Set up with YNAB

After downloading the program, or signing up for the free trail at YNAB.com, there are a series of videos that clearly help walk you through the process. They also have emails they send you for the first week that help you in the beginning. They make the videos as interesting as possible, but honestly, this is budgeting that we are talking about, and so during this process my mind began to wonder a bit. Overall, the videos were very good but when I went to enter my data and set up my account, there were many questions that came up that I have to figure out and it took me several hours, but I didn’t let it stop me.

How to Start

YNAB tells you to start from where you are today. Don’t go back over past receipts, bank statements, etc. That will just be busy work. Start from where you are right now and move forward. What you do is you enter in your financial accounts first (bank accounts, credit cards, etc). Some online budgeting/money tracking sites, such as personalcapital.com, will allow you to link your bank accounts, credit cards, etc. to their site quite easily. YNAB does too, but it’s not as easy.

After you’ve set up your accounts you go through and create a budget by using either their preset categories and/or adjusting the categories to fit your life. You do your best to try and look ahead at what you are going to need that month in certain categories (ie…is there a holiday or birthday or special weekend that is going to cost more than your average week costs?) You set a budget on all your categories and then you try and stick to your budget.

Rainy Days

They have a section called your “rainy day” accounts which is where your money starts working for you. If you have money saved little by little throughout the month/year then when you have to spend money on a bigger purchase or repair, you will have money in your account and not have to pay a bank or credit card company to use their money. Your money is essentially helping you so you never have to pay interest, thus saving you a lot of money.

Throughout the month

As the month progresses and you make purchases, you record them and correctly categorize them to track the money correctly. Although part of YNAB is giving your money a job and letting it work for you, your biggest job is to stick to your budget.

Wants and Needs

It’s important to be able to distinguish between wants and needs. This is the biggest problem with people and their consumer debt. You see the latest Best Seller or a great pair of shoes that would go perfect with that new outfit. When trying to have more money by budgeting, you have to always be asking yourself, is this a need or a want? If you are always spending your money on your wants then you will never have money for your true needs, like that hospital bill or car repair. You will have to pay someone else to use their money to cover those needs and you will never have financial freedom.

The Dump System

One unique thing about YNAB is what I like to call the Dump System. When you go over your budget in a certain area, the program will take money budgeted into other categories and give it to the overspent category. That way, throughout the month, you will always see how much you have left to spend before going over budget overall. It dumps money from one category into the next if you haven’t been careful or if there has been an unseen expenses.

There’s an App for that!

Conveniently, YNAB has a free app that can link to your account through your google cloud. So that you can allocate purchases on the spot as you make them and not end up with several hours worth of work at the end of the day/week in updating your account.

So, Go To Hawaii Already!

If you are looking to have more money, then you need a budget. And you need to be willing to give it regular time and management in order for it to be successful. It will hurt in the beginning, especially when it comes to not purchasing things because you recognize them as wants instead of needs. But the more you do it and stick to your budget, the more money you will build up in your rainy day accounts, bank accounts and investment accounts. And then when you have the money you can see a good deal on a trip to Hawaii and say, “Yes. I need that now.” And you will have the money to pay for it and you will be able to truly enjoy your vacation because the financial part of it will not be stressing you out.

YNAB Summary

Advantages

1. Tight focus on the budgeting process that has proven results. YNAB says that those who follow their four rules see on average a $200 turnaround in their spending.

2. Easy to use software

3. App that syncs up with your home computer.

Disadvantages

1. No Direct connection to your bank. It’s tough to get things updated if they are not all in the same place. They have way to add bulk information from a file but no direct connection to your bank. Here’s what they say about it:

We’ve found the direct connection to banks really pulls people away from their money (psychologically). We don’t have any plans to add direct connect into the software–from a philosophical standpoint–as the further you are removed from your money, the easier it is to remove your money from you. Conversely when you are completely aware of the flow of your money then your money tends to fall in line with your actual values much easier. (That’s where you find contentment.)

If you can get past the lack of a direct connection, I think you’ll love their software.