Making Your Life Easier Use Online Tools for Automatic Budgeting
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Creating a budget is relatively easy. I can look through old bank statements and cancelled checks and get a decent estimate of how much I spend a month, but inevitably, Ill always forget the $10 I spent on a movie and the $2 on parking. Over the course of a month, $5 here and $10 there can really add up. But, like I said, creating a budget is the easy part. Managing it and sticking to it are the hard parts.
Why Do Budgets Fail?
Sticking to a budget often fails for a variety of simple and explainable reasons.
1. Forgetting to account for unplanned expenses. Its hard to predict when your car might break down, or your dog gets sick, but everyone will likely have expenses like this at some point each year. Creating an emergency fund is a great way to make sure you have enough for unplanned expenses.
2. Inability to track a budget. I make many purchases each day, most of which I dont even realize its just habit. Coffee in the morning, lunch, a small snack in the afternoon, gas, pay an electric bill, get groceries for dinner.
I would need an extraordinary amount of discipline to write down every expense, every day, for a month. Im honest with myself and know that Ill never keep it up.
3. Failure to commit. Sticking to a budget is like sticking to a diet. You try to make a sudden and drastic change to your lifestyle, but the change is too much, too fast – old habits prevail.
Make Your Budgets Work
Step 1 – Pick a Central Hub for Your Cash
What helps here is to simplify as much as possible . I use one checking account as a central hub for my money and I make sure it has the features I need to effectively manage my money and pay my bills.
The most important features to me are electronic bill pay, online statements, and free access to ATMs, location and convenient access to branches and ATMs, and zero monthly fees or minimums.
Notice that I dont care if I earn interest on my checking account. I do care, however, that I can easily get my money out of my checking out into accounts that earn interest.
Step 2 – Avoid Using Paper Money
Over the course of a month, I would lose track of where I was spending my cash, so I decided to stop using paper money wherever possible and utilize the free debit card my bank provided.
Now, I pay for all my purchases with my debit card, but I ask the merchants to swipe the card as credit. My account is still debited immediately and I receive the benefits and protection of going through the credit card network. When I log into my checking account I can then view an itemized list all of my purchases.
After two years of this system I switched from a debit card to a credit card for the better rewards programs; however, I make sure to pay my balance off every month to avoid interest charges. In my mind, Im using the exact same process as before.
Step 3 Pay All Your Bills Online
My checking account allows me to pay virtually anyone online, free of charge. Utilities like my electricity, TV, internet, and mortgage companies have electronic lock boxes that accept electronic payments from my bank account through the ACH system.
My payments are received in about a day and I never have to worry about making sure I have enough stamps or envelopes. Plus its all free!
What if you need to pay your friend back though? Its unlikely that he has an electronic lock box, but you can still pay him online. Simply enter his name and address and your bank will create a paper check and mail it to him on your behalf.
Besides the convenience, paying my bills online allows me to still maintain one account where all my expenses originate from.
Step 4 – Utilize Online Tools to Make Your Budget Work
Now that your expenses are paid for with either a debit card or through online bill pay, its time to start analyzing your expenses. One of the easiest and most effective ways to make your budget work is to utilize free online tools like Mint.com, Wesabe.com, JustThrive.com, or Geezeo.com to track your spending, how much youre saving, and how your investments are holding up.