Financial Symmetry News & Views

Posts Tagged ‘Quicken’

With the end of the first quarter of 2010 behind us, now is a great time to review your budget.

When checking up on your budget, it is important to look over a specific amount of time for comparisons to actual expenses. Comparing expenses on a monthly basis can be a source of frustration as there are many fluctuations that occur throughout the year (holidays, vacation, etc.).

Therefore, it is important to measure your progress against a rolling year period.  For example, if you have been using a budgeting tool for one year or longer, you would want to compare from February 1, 2009 to March 31, 2010.  If you are just getting started, looking at smaller increments of time, like three or six months, can also be helpful.

No matter what your time frame is, here are a few tips to help streamline and update your budget:

• Budgeting software often has trouble correctly categorizing a few expenses.  Take a quick look at your transactions and identify and correct those that are mislabeled. If you are using Mint.com, be sure to take advantage of their easy to read ‘trend’ section.  You can see where you’ve spent money over specific categories in charts that allow you to drill down to the transaction level, helping to spot inaccurate transactions. If you don’t use budgeting software, compiling data from your receipts and statements will be a good way to get you started.  Remember, you are trying to identify how to spend less than you earn.
• Revisit the items you have budgeted.  Now that you have been tracking for a few months or longer, are your budgeted items realistic? Maybe some adjustments need to be made to common expenses like household utilities, food and dining, transportation costs (including gas and regular maintenance), and discretionary (misc. spending).
• It is common for your expenses to fluctuate over time and for some expenses to occur only during parts of the year.  Some items, like car insurance, homeowner association dues, and professional fees may be paid quarterly or semi-annually, so be sure to include those expenses in your budget now.
• If you are spending more than your budgeted amount on a regular basis, take some time to plan out ways to reduce your spending.  Little things like taking your lunch to work once or twice a week, making coffee at home, or planning errands around one trip can all add up over time.
• Have you had any lifestyle changes that should be reflected in your budget?  A home purchase, renovation or new child can increase (or decrease) spending and should be accounted for.  Adding new expenses to your budget while taking time to review your overall spending picture can help set you back on track.

There’s no better time than the beginning of a new year to implement a new budget in order to gain control of your spending.  In the final installment of our series on Quicken, we provide a few pointers to make using Quicken more meaningful so that you can better track where your money goes.

Should I be trying to hit the same number every month?

Comparing expenses on a monthly basis can be another source of frustration. There are many fluctuations that occur throughout the year, like holidays, summer vacation, and surprise home/car maintenance issues.

This is why it’s most helpful to measure your progress against a rolling year period. For example: You’ve just finished November, so you will want to measure December 1st of last year to November 30th of this year against the calendar year amount of your budget. If the amount is more, then you know you are a little ahead of pace and you should scale back.

If you’ve been diligent enough to hang in there for a year of budgeting, then you are fortunate enough to have a full year of meaningful comparison points.  So for this month, it would be best to investigate how January 2010 is comparing to January 2009’s data.  Barring any unusual spending activities in Jan. 2009, you should have some useful targets to compare to this year’s spending.

Performing this exercise monthly can greatly improve your overall financial picture as it allows you to have greater control over your regular expenditures.

How many categories should I be using?

Trying to determine which category your expense should go can be very confusing when you have forty to choose from.  Add in multiple subcategories for each of the main categories and you’re about ready to pull your hair out.

Luckily, Quicken allows you to edit the category list which should be your first action step when loading the software.  We recommend using 8-10 categories that will capture all of your spending.  This list includes:

• Clothing
• Communication (Phone, TV, Internet)
• Discretionary (Cash, Travel, Fun, Church/Charity Contributions)
• Food (Dining Out, Alcohol, Groceries)
• Debts (Mortgage, Equity Line, Car Payments, Credit Card or Student Loan Payments)
• Education (Books, Private School, College Tuition)
• Health & Hygiene (Gym Membership, Doctor Visits, Prescriptions)
• Household (Maintenance, Home Improvements)
• Investments (Roth/IRA Contributions)
• Risk Management & Financial Services (Bank Charges, Insurance)
• Taxes
• Transportation (Gas, Repairs, Car Insurance)

By practicing these two steps you should be well on your way to becoming a successful budgeter.

Not ready to make the jump to an online budgeting tool? Quicken software may be what you are looking for.   The following is a brief overview of Quicken software.  Check back next week for tips on establishing categories in Quicken.

As many of you know, it can be hard to create a budget and even harder to stick to it.  The key to sticking to your planning is continuous monitoring.  To do so, we generally recommend using software like Quicken that is designed specifically for expense tracking.