You Need A Budget

Many of those who are older and wiser than me would probably agree that everyone needs a budget to manage their money. I believe this also. However, I have found it difficult to track our money effectively in this modern age when we hardly ever have cash in our hands. We have used Quicken for many years but it really hasn't made much difference in our spending habits. The only thing I can get it to do well is run spending reports. This comes in very handy when I need to present the HOA finances at a meeting (I'm the HOA treasurer). Our personal spending habits, on the other hand, have always been hard to grasp.
In my neverending quest to be more organized, I downloaded a free spreadsheet for my hundreds of coupons I've already acquired. When I opened the program, there was a sort of "welcome" page that described the spreadsheet creator and his purpose for making spreadsheets for money management. In the midst of his writing, he mentioned the, not-so-pleasant, task of budgeting. He then quickly described a software program I'd never heard of, YNAB3. Definitely not one of the big names. But the description was enough for me to look further and read more reviews. I liked almost everything I read and decided to download the 7 day free trial. I have had it for 2 days now and see the incredible potential it has for budgeting.
This is not a checkbook register type program like Quicken. You do enter transactions and reconcile them to your accounts. However, the difference is in the budgeting.
After setting up your accounts, you set up a budget. For me, this is difficult because I don't know exactly how much money we currently spend on things like gas or groceries. So I'm starting out with very rough estimates. I will use groceries as an example of how the budgeting portion of the program works. Let's say I budget $500 per month to groceries. As I enter transactions in the "groceries" category, they are automatically deducted from the groceries portion of my budget. I start out the month with $500. During week one I spend $60 at Albertsons and $40 at Safeway. When looking at my budget screen it will tell me that I have $400 left in my grocery budget for the month. Week two I spend $175 at Costco and $25 at Wallmart. I'm now down to $300. Week three, another $50 goes to Albertsons and Safeway each, taking the amount left for groceries down to $200. I'm just too tired to do any grocery shopping during week four so I end the month having used only $300 of the $500 budgeted for groceries that month. Now I start month two and again I have budgeted $500 for the month. HOWEVER, since I didn't use $200 of the $500 budgeted for month one, this amount carries over to the next month and I now have $700 in my budget for groceries that month. The basic design of the program is the "envelope" system. I remember my mom using this system when I was younger. She would put cash into different envelopes and use only what was in the envelopes. When they were empty, there was no more spending for that category unless you stole from another envelope. Now, YNAB3 allows you to do the same thing only virtually.
The one thing I dislike about the program so far is the inability to easily download transactions from an account. However, this may not be such a bad thing since there is somewhat of a delay between when a purchase is made and when it is posted to your account. Manually entering transactions will help us stay on top of our spending.
Are you wondering what YNAB means? Well, the creators of the software were not very creative. They simply took the idea "You Need A Budget" and condensed it down to YNAB. Clever? Maybe. Creative? Not really.
If you are interested in finding an easier way to monitor your spending or following a budget, look into YNAB3 (oh, the 3 is because this is the 3rd version). YNAB3