Refining My Current Budgeting Process

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Everyone always says to make a budget. So why do so many people not do it? …’Cause it’s hard! At least for me it is. A while back I bought Quicken and Microsft Money in the hopes of being a super-organized personal finance software guru. Now? I only fire it up once a month. And mostly because of this blog. (Another reason I can’t sell it.) Here’s my current budgeting process:

1) Buy stuff as much as humanly possible with credit cards.
2) At the end of the month, download all my statements electronically into MS Money.

3) Go transaction by transaction and label each one by category (Utilities, Rent, etc.). The good thing that through time MS Money is getting a bit smarter. For example, every time it sees “Safeway” it puts it automatically under “Groceries”. So in total it takes about thirty minutes at the end of the month.

4) Run a ‘Spending Report’, where the software organizes everything into nice little buckets. I can see exactly how much in a given time period I spent on Gas, Clothing, and so on. I compare these with the Target Areas and amounts I have chosen to focus on. See my July Budgeting Results.

5) Then I can decide whether I need to adjust my budget and/or my spending patterns.

Pros of this method:
– It’s easy and take minimal time.
– Because of this, I’ll actually do it!

– I’m only get to see monthly check-ups on my progress.
– I can’t do real-time analysis like “It’s only the 10th, and I’ve spend 60% of my Dining Out budget, I should stop eating out so much.”

For some reason I can’t seem to spend the 10-15 minutes every day and manually enter my transactions like some people do. I always put it off for a couple days, then the receipts stack up, and then it’s all over. I’m going to try instead to make a mid-month check-in. At least this way I’ll fire up MS Money twice a month…

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  1. I’m struggling with the same overall “budgeting” challenges, and I “update” quicken every day I am home (and not traveling for work) and manually enter all cash/check transactions weekly (fridays)

    Does MS allow you to just download the txns since last download? Quicken does this as a matter of course especially with credit card txns and that way I can use quicken to do CC data entry for me. In other words, I launch Quicken several times a week and press the “update” button and it brings down all credit card transactions and Fidelity (Roth and Rollover IRAs) txns when applicable.

    With ING and my USAA checking I do have to manually surf to their websites, get to their download pages and kick it off from there, but the CC stuff is a breeze. Maybe there is a way to do that in MS as well? If so, that might help you get more of a real time sense of the cash flow.

    No one likes to enter data that they ultimately don’t have to, so I see your quandry 😉

  2. That’s the thing, my MS Money updates are very sporadic – sometimes they work, sometimes they don’t . And chances are when I run it at least ONE of the credit card issuers doesn’t sync properly. And then I still have to categorize everything.

    So credit card tracking is better with Quicken? Maybe I should give Quicken another go, if only to track my spending. Thanks for letting me know. =)

  3. Quicken is no silver bullet 😉 I am running Quicken 2005 for windows inside Virtual PC on my iMac so it’s beyond slow to use, but I don’t really have trouble syncing. Every once and a while it will have trouble establishing a connection to an account, but that’s always cleared up by a retry.

    Quicken 2005 has the concept of “renaming rules” that make it pretty easy to sync up txns that “appear” different. for example, once I match a “PAYMENT – THANK YOU” transaction to my own entry that was “CreditCard Foo” it remembers your preferred name and will rename transactions upon download accordingly. I am sure there are ways of training it, but it’s been pretty easy so far to rename auto entries and the like without much effort. And it does appear to remember my categories, but YMMV.

    Where Quicken really falls down for me is how they handled the QIF to QFX changeover. I can no longer download my bank transactions since they only offer QIF and 2005 no longer allows QIF for most types of accounts. I am back to manually entering everything that hits my main checking account since the switch.

    I use Yodlee to quickly double check I am not missing bank transactions (my bank’s site is onerous to use and ugly) and that helps keep me honest 😉

    But yeah…Quicken, for me, has been great at entering my CC txns for me. So…gotta give them props for that because that has been a HUGE help in the awareness battle. The “UPDATE” button is my friend!

    good luck!

  4. I’ve used both products, and they do the same things. I prefer Quicken but not by much. Instead of budgeting, I just do my saving first. Then the bills. Whatever is left I can spend 100% of and not worry.

    It was tough starting out, but I started out with saving $100 a month and then saved 50% of my salary increases and promotions over the years. One year I put 100% of my raise in the 401(k). It didn’t take long to max out the retirement plans.

  5. Jon Harper says

    Every monday I download all my transactions. I do this b/c:
    1) It’s good to catch any sneaky finance charges from credit cards as soon as possible.
    2) It’s good to review your credit card bills (and schedule payments) weekly.
    3) It’s very satisfying to know that if i’m not caught up on my finances on any given day, I will be caught up the following Monday.
    4) I save alot of time doing it weekly rather that daily.

    Reason why it saves time to do it weekly vs. daily:

    Sitting down to my computer, firing up and closing down MS Money, and downloading all transactions takes a combined 10 minutes for me.

    (7 days of week) X 10 min = 70 min. Thus, I save 60 min. by doing it once a week.
    Some other ideas that may be useful for you…

    1) Use a firefox bookmark folder for all your account login pages. Then whenever you download your transactions, go to Bookmarks -> right click on folder -> “Open in Tabs”.
    2) Use RoboForm to mangage your passcards…this makes logging in to your accounts very simple and quick.
    3) Use the GTD system for managing your receipts (namely, use an inbox and filing system).

  6. muckdog – But how do you know how much is left? That’s my problem, I don’t know how much I’ve already spent, I only have a vague idea whether or not I’ve bought anything stupid 😉

    Jon – Thanks for the tips, I just got into Firefox and that sounds like a great idea. GTD = the book, ‘Getting Things Done’? I really should read that book.

  7. I have never found a financial program that I really like enough to stick with regularly. I like to keep it simple, and they are generally too granular for me personally.

    As far as real-time analysis goes, basically, I give myself a weekly allowance. After creating my budget, I divide certain expenses (groceries, dining out, personal expenses, etc.) into weekly blocks. Then, each week, I make a separate cash machine withdrawal for each expense (this way, there is a transaction trail for when I do find the perfect financial program).

    It may not work for everyone, but cash machines are fairly ubiquitous these days, and I generally have a pretty good idea of how much of my budget remains at any given time during the month.

    Oh, and I second the Firefox bookmarks suggestion.

  8. Firefox is the best, the open in tabs idea sounds like a good one. I too just started GTD, but put it down temporarily to re-read Your Money or Your Life. I was really liking GTD…good concepts.

  9. I use MS Money and it works pretty well for me. The only thing that irks me is that I have to go to each bank/cc site and manually download the transactions (I too use the bookmarks and tabs feature in Firefox). I guess it is better than writing them down by hand but what I really want is the ability to click one button in Money and all my transactions from all my banks/cc get downloaded. That would be cool. (Maybe it does this in the US, but it doesn’t work in Canada.)

    I update my accounts every Tuesday night to give time for all my weekend transaction to be processed. I find this gives me a better picture of where I am at.

  10. I’ve found that forcing myself into the habit of entering the data at least weekly actually results in lower spending, since part of my evaluation process when I purchase something is now “Do I really want to have to enter another receipt into Money/Quicken?”

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