This is pretty much true for every single person in every single financial situation. Whether you’re a millionaire, or paycheck to paycheck, or homeless. You need to understand where your money is coming from and where it’s going.
Budgeting software is a massive force multiplier. Here’s a screenshot of my spending last month, categorized by my budget software. It’s fairly high, because I had a large vet bill (which I was expecting and had saved for) and I got a bonus which went into my IRA. This is just an overview; you can go deeper into each category and see every single transaction.
This software is You Need A Budget, which is a paid software. It’s $14/mo, which I think is worth it since it helps me save far more than that. I used to use Mint, but since it’s been killed there’s a lack of good budgeting software that will do automatic recording of transactions.
Other good options I’ve seen are Monarch Money, Simplifi, Personal Capital, and Rocket Money.
Nice post!
Thanks! I figure I’ll just make random posts with financial advice until we get more discussion
One thing I see a lot on the reddit personal finance sub is people posting a budget like this:
Our monthly income is ~$6,500 net
House is worth 325k
401k’s have about 400k
I also have a pension in retirement
Bills—- Mortgage/esgrow $1800 Owe $105k
2nd mortgage $1000 Owe 105k
Car payment $617 2nd car paid off est value of 37k
Insurance $370
Phone bill $250
Utilities $250
Groceries $1200
Life insurance $135
Credit debt ~37k over 3 different cards. 10k @0%
Mortgage is at 2.75% 2nd is at 11%
Which…ok, that’s waaaaay better than nothing. We have something to go off of here. Phone bill is crazy high, that’s a ton of cc debt, etc. But it could be so much better. It doesn’t explain why the cc debt is so high. Why do they have a 2nd mortgage? How many people is that grocery bill feeding? Where’s the “eating out”, “movies”, “vacations”, “random gas station snacks”, the stuff that might have caused the cc debt in the first place? The more granular the better.
There is also local budgeting software out there. Buckets is a nice version for the “envelope” system. If you want to sync to your accounts, they offer a $15/yr service to do that called simplefin. The software itself is free to use forever, but a license is $64 when you feel like paying. Not limited like shareware, just a generous business model.
You can also go with Actual budget, a self hosted and FOSS budgeting software, fully free. It can also use simplefin to sync accounts.
Simplefin is new to me! I downloaded buckets but didn’t really get past setup because I need sync, it’s just infeasible otherwise with how many accounts I have.
There’s basically two approaches to a budget: the “here’s what you should spend” approach and the “here’s what you are spending” approach. A lot of people looking at getting their finances under control will try the first approach without ever doing the second one, and it causes problems. You can set a goal like “only spend $100 a month on groceries”, but that’s totally arbitrary and may not work at all for your situation! It might be that the absolute bare bones minimum you (or your family) can get by on in your area is $150 a month of groceries, so then you break your budget every month so then you get depressed so then you stop budgeting.
My advice is to just track your actual spending for a few months. Don’t try to change everything at once. Focus on one category at a time, see if you can bring that down. Maybe you can, maybe you can’t. Don’t make an aspirational budget. Your very first budget should just be a basic list of what you actually spend. Once you know that, then you can decide a plan of action.
