Taking Your Household Budget Online
- Matt Bell SoundMindInvesting.com
- 2013 5 May
Several years ago, a strange trend emerged in the personal finance world. Using a budget started becoming something very close to cool. Until that time, the mere mention of the word “budget” brought looks of dread to most people’s faces. What seemed to turn the tide was when budgets went online.
Today, the leading online budget tool, Mint.com, boasts more than 10 million users. Mint and its handful of competitors, including LearnVest.com, are online budget “pure plays” in that they link to your bank, credit card, and investment accounts, importing transaction data from those accounts automatically. There are hybrid budget tools as well, such as You Need a Budget (YNAB), which provide online budgeting but do not link to your financial institutions. You can download bank transactions with YNAB, but not automatically. It’s designed for those who are concerned about the security of linking to their accounts.
Speaking of security, Mint and its pure online budget brethren point out that they use “bank level security”—the same approach your bank uses when providing you with online access. They are also “read-only” services, meaning you can see your bank balance, credit card, debit card, and check transactions, and investment performance, but you can’t actually move any money around. If you can’t take any money out of your accounts via Mint, neither could a cyber crook. Adding to the security of such tools is the fact that linking to your financial institutions does not require your account numbers—just your user ID and passwords.
In our household, we’ve used Mint for three years and never had a security issue. We had been using Quicken software, but switched to Mint for two primary reasons. First, the service is free, whereas you have to buy Quicken software. Mint makes money from advertisers, but fortunately the presence of ads is not very distracting. (Since Mint knows where you do your banking and what credit cards you own, it offers suggestions as to where you may be able to find better deals, mostly among its advertisers.)
The second reason we switched to Mint is the fact that it is an online service, which provides us with easier access to our budget information than software tied to one computer.
To take your household budget online, here are the first three steps. Mint will be used as the example, but the process is similar with other services.
Opening an account with Mint requires only an e-mail address, your country of residence, your zip code, and a password.
Link to financial institutions
Next you’ll be asked to link to your bank, credit cards, and if you’d like, your investment accounts. That way, transactions can be automatically pulled into the tool (which takes a lot of the pain out of the budgeting process).
Set up a budget
The prime value of a budget is that it gives you the information you need to manage your cash flow. Being able to see, at any point in time, how your current spending in a certain category compares with your planned spending goes a long way toward helping you stay within your budget.
So, how much should you plan to spend on groceries, clothing, and all the rest? The SMI web site has recommended spending guidelines based on four household sizes and nine different annual incomes. Use these guidelines to help you set up a budget on Mint. Click the “Budgets” tab, choose “Create a Budget,” and then use the “Choose a Category” menu to enter targeted spending amounts in each of your relevant categories.
Once your categories are set up, click the “Transactions” tab where you should see all of the transactions Mint pulled from your bank. Go through the list to make sure the categories Mint has chosen are the same as the ones you chose in the “Budgets” tab. If you want Starbucks’ expenses to be part of your “Entertainment” budget, you’ll need to change Mint’s likely default category, “Coffee Shops,” accordingly. The good news is that when you click the “Edit Details” tab for a given transaction and change how it’s categorized, Mint will ask whether you want all such transactions categorized that way—a big time saver.
So, that’s how to get started with an online budget. Next week, we’ll address a couple of the most common questions related to online budgeting. In the meantime, what are some of your questions about using an online budget tool?
Matt Bell is Associate Editor at Sound Mind Investing. Since its founding by Austin Pryor over 22 years ago, SMI has been providing clear, trustworthy, effective investment guidance to the Christian community. Some 10,000 subscribers look to its flagship publication, the Sound Mind Investing monthly newsletter, for biblical guidance on a range of financial issues and specific investment advice.
Publication date: May 17, 2013