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How to Use Home Budget Software

Don't go at it alone; use software to help with your budget.
Don't go at it alone; use software to help with your budget.
Comstock/Thinkstock

If you're new to the world of home budgeting, don't be too apprehensive. Even if you've never kept track of your spending before, there are lots of tools around that can make the process almost fun. We say almost because keeping a budget can be -- an education. There's a fine line between reward and indulgence. Understanding how that relates to your habits and your finances can be the first step on the road to financial stability.

Computers and the Internet have made record keeping a lot easier. You can enter information one way and see it sliced, diced and compared in lots of other insightful and enlightening ways. You can also customize your preferences to meet long or short term goals and suit your personal temperament. The temperament part is important. A budget is only effective if you use it.

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To use a budgeting aid, you track your income and expense by keying-in or uploading details about your financial life. If you're a Type-A personality who loves details, financial software was made for you. If the prospect of balancing your checkbook sounds like root-canal without anesthetic, then you'll want a budgeting aid that's intuitive, fast and easy to use.

Before we start exploring the numbers, take a minute to think about what you want to accomplish. Do you just want to see where your money is going? This could involve a few simple notations about certain types of spending over a limited period of time. If you want to set up multiple categories with spending limits, that will require a more sophisticated solution. If you want to use that information at tax time too, or need to expand the scope of your approach to include financial planning and investments, you'll want a program that will grow as your needs grow. Recognizing what you want to accomplish -- and knowing what you'll realistically stick with over the long haul -- will save you money and effort.

Grab your willpower and hold on tight. We're about to explore the wondrous world of budgeting software. Some of the options may surprise you, too. From programs that automatically download data from your online bank statement (or upload info from your phone or PDA) to free services that live in the cloud, this isn't your mom's ledger sheet with the loopy handwriting and notations written in red ink. This is the 21st century, and money minding has gone high-tech.

Budgeting is part of the financial planning process, but it isn't the most sophisticated part. If you feel you need to track how much money you spend on entertainment or groceries, you may want to set up a budget that tracks just certain types of purchases; or you may want to track all your purchases but group them into special categories you specify, like emergency chocolate or depression-inspired lingerie. Because budget tracking can be an elaborate or simple process, software designed to handle budgeting can be designed especially with budgets in mind or be part of a larger financial services package. It can even be accomplished using a straightforward spreadsheet program and a series of macros:

  • Spreadsheets -- By far the simplest form of budgeting software is a simple spreadsheet program with a budget template that uses a few macros (special functions) designed to make entering budget data easier. You can even find free templates with a quick keyword search in your browser. This is an easy choice, especially if you have a spreadsheet program like Microsoft Excel or use Open Office Calc. Any data you enter can be cut and pasted (or exported via a .txt file) to another program or document later. A simple spreadsheet has limited functionality because it won't, say, import your checking account information with a simple click, but the absence of all those specialized functions makes it a quick start proposition that will have you entering data within 15 minutes. Starting out using a spreadsheet program has another advantage. If you're not quite sure how dedicated you are to the proposition of tracking all of your expenses, you can use a spreadsheet during the testing phase to discover what you're comfortable with and decide on the types of categories that work for you.
  • Computer-based budgeting software -- Dedicated budgeting software is available in two broad varieties: computer-based and Web-based. There are advantages and disadvantages to both options. If you like the idea of maintaining strict control of your information, then a dedicated software package is for you. This will typically be a one-time expense, and you won't have to worry about having all of your data sitting on a server somewhere. That isn't to say online storage services and cloud computing aren't safe, but some people like the comfort of knowing that their information is snug on their own equipment (and protected with excellent security software!). The most popular computer-based dedicated budgeting software packages aren't free, but the good news is that they often have value added features like comprehensive tutorials and good customer service support. The top contender in this category is You Need a Budget. It has the advantage of a very involved community of users that can help get you into the spirit of working with the program regularly. 
  • Web-based budgeting software -- Like it sounds, Web-based budgeting programs aren't loaded onto a single computer. You access them via your browser. After you create an account, you key in or transfer information onto hosting servers. This may seem a little scary, but often Web-based applications have better security than your home computer does. Web-based budgeting software has some other attractive benefits, too. Instead of having to rush home to update your information, you can do it from any computer, smartphone or other device with Internet access. Where you may balk at having to spend 20 minutes entering information after a hard day's work, entering an expense or two while on your lunch hour may seem like a smaller chore. Some Web-based budgeting services offer bare-bones packages free. Web-based services are also pretty intuitive, and compatibility issues are less of a problem, too. Pocketsmith, Calendar Budget and Pear Budget are some examples of Web-based budgeting systems.
  • Financial planning software -- Financial planning software packages like Quicken, and Web-based services like Mint (which is free), offer a lot more than help setting up and maintaining a budget. If you're already using one of these solutions to manage your finances, then they're great options -- but then you probably already know that. If you aren't using a comprehensive financial planning solution today, and don't need the full functionality one offers, then setting up a simple budget may involve more of a learning curve than you want to tackle. If you've dreamed about streamlining your financial life with a tool that can do it all, including budgeting, a full featured financial planner is a great way to avoid redundancy. If you're after something simple, though, a spreadsheet or dedicated budgeting software solution is probably for you.

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Budgeting software can be relatively simple or pretty complex, but within that range, packages offer a variety of features. There are some budgeting software functions that are important for just about any user, though:

  • Comfort and Ease of Use -- Most online and computer-based budgeting packages offer a free introductory trial period. This is actually great news. You can test drive a couple of programs to see which one appeals to you the most. Just limit the information you enter in any single package to a few items, and then move on to the next. That way you won't waste too much time on the getting-to-know-you part of the process.
  • Flexibility -- Your budget may be full of entertainment-related expenses if you're single, and child-related costs if you have a family. The best budgeting programs are customizable enough in the way they let you assign categories and style reports that you can make the particulars of your budget specific enough to be helpful. Being able to change the amount of your monthly income may be important if you own your own business or work seasonally, too. The less sophisticated a budgeting program is, the more likely it is to contain limiting one-size-fits-all assumptions.
  • Output -- If you want a nice printed report to mark up and review while watching television, make sure the program you have in mind has a print function. Some don't. Ideally, you'll also want to customize reports based on a period you choose, and review them either online or in print form. It's true that you may rely on the same reports month after month, but until you recognize the details that most interest you, flexibility in reporting is an important feature to consider.
  • Export --In time, you may decide to conduct more of your financial activities using online or computer-based tools. Upgrading to a more sophisticated system may result in loss of data if you can't move your information. Make sure whatever system you decide to use has export capability or is comprehensive enough to grow with you.
  • Security -- Most budget and personal finance programs these days are very security conscious. They make full use of passwords and encryption where needed. It's still a good idea to check the product forums for any current security or other issues before you buy (or sign-up). This is especially true if you plan on allowing the program access to your bank accounts.

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Sources

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