Budgeting software is probably something most of us don't think about too often, but according to most personal finance experts, it's one of the most important tools to ensure financial success. Creating and sticking to your own budget can be difficult, which is exactly why budgeting software can be handy both on a personal and small business level. It can help you meet financial goals to make new purchases and give you long-term views of your investments, your spending habits and perhaps most importantly, help you tuck away a little bit in case of emergencies. Most budgeting software is connected directly to your bank account and works essentially like a smart checkbook that automatically balances and suggests ways to save money.
Budgeting software has been around for a long time. In fact, one of the first programs on home computers, the spreadsheet, was quickly turned into a way for people to balance their checkbook. Software like VisiCalc, which was the first spreadsheet program for personal computers, gave users a chance to see their data in front them in a clean, simple and orderly manner [source: Hormby].
The rise of the personal computer is also the origin of home budgeting software. When Microsoft DOS and Windows systems gained popularity, so did programs like Quicken, which were tailor-made to help track your budget.
Since then, a lot has changed. The software has become more accessible -- you can now access budgeting software directly online, through a download, CD-ROMs and even on your smartphone. One of the first programs to hit the market, Quicken, is still one of the leaders in the field -- and the company behind it, Intuit, is also leading the Web application push with the Mint.com service it acquired in 2009. Mint.com integrates all of your accounts online so they can be accessible from anywhere [source: Wortham].
And this is exactly where many of these services are heading. Combined with a push for more mobile applications designed to keep tabs on your expenses and track your purchases, the main focus of budgeting software is about availability and ease-of use.
There are still a lot of options, and many are better suited for small business than they are for personal or private use. Over the course of this article, we'll look at how some of the most popular software works and how it helps you keep track of your finances.
Small Business Budgeting Software
Budgeting a small business can be a bit more difficult than a personal budget, because income isn't as normalized, and several factors -- like the cost of goods and services --aren't always fixed. Because of this, small business budgeting software comes in a few different shapes and sizes, depending on which features you're most interested in. Some, like Quicken Home & Business, blend together your personal and business finances in one place so you can easily track both at the same time. Others, such as QuickBooks, PeachTree and Plan Guru, offer additional features like payroll services and payment processing to the mix. You'll need to pick what you need based on the size of your company and the features you're looking for.
The core of these programs will be familiar to most people who have balanced a budget. On top of the increased support for business-specific factors, small business software offers more forecasting methods to help you better plan your business' budget. For instance, you could look at potential profits over the course of 10 years using historical data, or you could use your own set of factors. Most have several types of models built into the software to ensure you can get a wide-ranging view of your company's potential and plan your budget accordingly.
Unlike personal software, you also typically get more options for generating reports of all types, giving you a better idea of where your money is going and why.
For do-it-yourself types in both personal and small business software, there is the first and most common budgeting tool: spreadsheets. Most spreadsheet programs come with access to simple budgeting templates, or they can be found (often for free) online. These work similar to the software programs you can purchase, but require you to manually enter or import the data from your bank -- and they don't come with any snazzy routines to help you predict or categorize you purchase types.
Next up, let's get personal.
Personal Budgeting Software
Personal budgeting software is similar to the small business type, but in a stripped down, easier to use way. Many of the services allow you to directly import you bank statements by either exporting a specific file type from your bank's Web site, or by allowing you to enter your username and password so it can pull it directly for you. This software typically ranges from free to $100, with Quicken and You Need a Budget being two of the most popular.
With all of your financial data imported into the software, the budgeting program will categorize your expenses so you can see how much you're spending and where. For instance, the software will recognize your grocery store and put that into a "groceries" category or it will notice you've been hitting up the coffee shop every day and put that into the "eating out" section. This allows you to see exactly what types of expenditures your money is going to.
From there, you can set a budget with goals -- say you want to save up enough money to take a vacation by next year, you enter the amount of money you'll need, and then the budgeting software will look at your past data and generate an amount you need to set aside each month. In most cases, it's up to you to decide what might need to be cut from your budget if you're going to make your goal, but some software offers suggestions for where you might be able to trim down. It will also alert you when you spend more money than usual in a particular category, but it generally takes a few months of use before this becomes useful.
Software and Web-based programs like Mint, Buxfer and Mvelopes don't differ in many ways, with the exception that Web-based software comes with the added incentive to integrate everything into one Web site, which means you'll have access to it from any computer or smartphone. The downside is that it also comes with security concerns, since all of your data is being stored in one centralized location that doesn't have the security of your home computer. You'll want to keep this in mind when choosing which service or program is right for you.
At its core, budgeting software's goal is to help you create and maintain consistent spending habits and create an easy-to-understand means to reach your financial goals. For lots more information, continue on to the next page.
- Black, Sierra. "You Need a Budget. Yes, You." Forbes. July 29, 2011. (Nov. 7, 2011) http://www.forbes.com/sites/moneybuilder/2011/07/29/you-need-a-budget-yes-you/
- CNN. "Making a Budget." (Nov. 7, 2011) http://money.cnn.com/magazines/moneymag/money101/lesson2/index.htm
- Consumer Reports. "Budgeting by computer." June 2009. (Nov. 7, 2011) http://www.consumerreports.org/cro/money/resource-center/budgeting-by-computer/overview/budgeting-by-computer-ov.htm
- Hormby, Tom. "VisiCalc and the Rise of the Apple II." Sept. 25, 2006. (Nov. 10, 2011) http://lowendmac.com/orchard/06/visicalc-origin-bricklin.html
- Mint.com. (Nov. 7, 2011) http://www.mint.com
- Quicken.intuit.com. (Nov. 7, 2011) http://quicken.intuit.com/
- Rosato, Donna. "Create a budget (and stick to it)." CNN. June 27, 2011. (Nov. 7, 2011) http://money.cnn.com/2011/06/23/pf/how_to_budget.moneymag/index.htm
- Taylor, Kerry. "5 Big Budget Mistakes to Avoid." U.S. News. Nov. 4, 2011. (Nov. 7, 2011) http://money.usnews.com/money/blogs/my-money/2010/11/04/5-big-budget-mistakes-to-avoid
- U.S. News. "4 Budgeting Tools That Are Fun to Use." Sept. 16, 2010. (Nov. 6, 2011) http://money.usnews.com/money/blogs/my-money/2010/09/16/4-budgeting-tools-that-are-fun-to-use
- Wortham, Jenna. "Intuit Buys Mint, a Web-Based Finance Competitor." The New York Times. Sept. 14, 2009. (Nov. 10, 2011) http://www.nytimes.com/2009/09/15/technology/internet/15mint.html
- Youneedabudget.com. (Nov. 7, 2011) http://www.youneedabudget.com