The BudgetSketch Blog

Bring Your Money Home (And Keep it There!)

August 2nd, 2010 by Bill | Posted in General, Good Advice

Do you ever get that feeling like no one is listening to you, especially elected officials in their ivory towers far away from your doorstep? There are many emotions we feel when we lose control of our income and a sense of powerlessness is simply one of them. Yet, it is one we need not feel, even if most of our income goes to paying off debt.

Money is a funny thing. It feels like we’ve got lots of it on payday even if we turn right around and immediately hand it over to our creditors. We feel powerful for a few moments every week or two knowing that all that money is sitting right there in our bank down the street waiting for us, but of course we all know that it really isn’t in the bank. Banks can’t possibly keep all the deposits of all their depositors in every branch.

So where is all our money? Well, whether figuratively or otherwise, the truth of the matter is that it is rather far away unless you live in New York City or Washington DC. I won’t go off on a political tangent here, but it is difficult to ignore the corrosive effect such large concentrations of money (and the clout it yields) have had on our economy and government, especially in recent decades.

Wouldn’t it be great if we could serve our own needs first instead of serving the needs of those who have been over-served for too long? If only there was a way to bring our money and the power it wields home. Ah… but there is a way and that way is though membership in credit unions and community banks. What’s more, aside from depositing your paycheck in a credit union or community bank, you can keep your money close to home by moving loans from large commercial lenders based hundreds or thousands of miles away to local lenders.

Think of the effect it would have on our local economies if our money that was once making the rounds in far off places was returned home to us, to improve our communities, to grow our local economy. Think of the therapeutic effect it would have on our government. Politicians interested in seeking favor would have to follow the money to… dare I say it? Their constituents!

One thing we can do today to regain a sense of control over our finances is to decide who will benefit from the receipt of our hard earned income. You can send it off to those large commercial lenders in far flung skyscrapers, or to Washington, OR you can walk it down the street and have Washington or the state legislature have to come and get it. The choice is yours. Perhaps the links below will help you make your choice. We hope so.

Find a local Credit Union or Community Bank.

The Cart and the Horse

July 12th, 2010 by Dewayne | Posted in Budgeting, General, Good Advice, I Need a Plan, Uncategorized

There seems to be a flurry of activity these days when it comes to conversations about personal finance management. What applications are best to use, what are the best methods of tracking your finances, who has the slickest tools, account aggregation, etc. Two and a half years after creating BudgetSketch, it amazes me how little this conversation has changed.

When we set out to solve our own personal finance issues, it became painfully clear to me that tracking expenses alone was an almost fruitless exercise. My wife and I tried many personal finance management tools, but they all did the same thing… tracked my spending. I would look back at what I spent last month, then still scratch my head as to why our money was just gone. I could see things like a hundred dollars for the month being spent at the local coffee shop, but nothing about that information told me if I could afford it or not, only that I spent it. It all seemed so reactionary and frankly frustrating.

“Putting the cart before the horse” is a common phrase meaning to reverse the accepted order of things. This statement is also an example of a hysteron proteron in Greek, in grammatical terms, meaning a figure of speech used to describe a thing that should come second, but is put first. We’ve all said, “Put on your shoes and socks” to our kids, but we all know that you must put your socks on first before your shoes.

The same applies to personal finance. We spend so much time focusing on the need for expense tracking (“The Cart”) that we fail to see the Cart is really useless without “The Horse” (a Budget). It began to dawn on me that my plan for how I will spend money is the first thing to establish, then I should track how well I’m doing against this plan.

Expense tracking has it’s place in our arsenal of tools, but only implemented to help validate how well we’re sticking to our Budget plan. So it has to make you wonder why there are so many tools focused solely on expense tracking with a spending alert feature masquerading as a budget. If you’ve reached that conclusion… you’re not alone.

The saying is best said, “Never put the cart before the horse”, so why do we try and manage our financial lives this way? Take hold of your financial future by taking the reins and tell that horse where to go. Establish a solid budget plan and stick to it, and only look back long enough to validate how well you’re moving forward.

It’s time to change the conversation about personal finance and get real about solutions instead of allowing ourselves to be convinced by who has the best pie charts. Personal finance is about a plan, everything else is a support mechanism for that plan.

It’s time to change the accepted order of things… one budget at a time.

Goodbye Wesabe. Good luck HelloWallet.

July 4th, 2010 by Bill | Posted in Budgeting, General

Here in the United States we take our independence seriously. So I took offense to a claim of independence made by HelloWallet in a recent Fast Company article that also mentioned the demise of another competitor, Wesabe and left a comment.

I suppose it’s all about perspective. HelloWallet aims at differentiating itself from its primary competitor Mint, which arguably became a bit less independent when it was acquired by Intuit, more than HelloWallet desires to irk the founders of an upstart like BudgetSketch but be cognizant of the fact that in making their claim, HelloWallet is speaking about their company not you. In contrast BudgetSketch was founded to secure financial independence for its users. Period.

Let’s be frank, most “for profit” personal finance sites are interested in two things, your financial data and the ability to sell access to you to the highest bidder, or in this case often the lowest interest rate bidder. BudgetSketch has always maintained that while the folks at Mint have proven such an approach is very lucrative for site creators and their backers it is less helpful to the site’s users. Again speaking frankly, we hope to stand that model on its head. We aim to make you wildly successful financially while proving that you can make a living helping others first. More on this in a future blog post.

Profit driven personal finance sites focus on tracking your spending because that’s the data they’re most interested in. We believe that this “water over the dam” approach is not only wrong but counterproductive. We believe that the solution to most personal finance problems begins by looking forward, not back, with the creation of a budget. Budget in hand you can then track your performance against the plan by tracking income and expenses. Sites that generate what they call a “budget” from past spending data only ensure the persistence of bad habits.

Ironically, the failure of Wesabe boiled down to finances. BudgetSketch operates by the principals under which it was founded and the counsel it provides to its users, and has been built patiently, via hard work, using commonsense, with an eye on the bottom line. We are beholding to no venture capitalists and no creditors, only ourselves and our users, and we’re very proud of that fact. So goodbye Wesabe. Good luck HelloWallet. As for BudgetSketch and our users, we choose hardwork and commonsense as we work toward our personal independence days.

BudgetSketch: Proud Sponsor of Cincy Day of Agile

April 15th, 2010 by Bill | Posted in Uncategorized

Cincinnati Day of Agile – Registration Opens Today

Registration opens TODAY at noon. Seating for this event is very limited and this event is going to quickly sell out. Do not wait – register today at http://cincydayofagile.eventbrite.com/.

What is Cincinnati Day of Agile?

As the Agile project management process sweeps across the software industry, businesses not understanding the details are being left behind. The Cincinnati Day of Agile is an opportunity to understand what Agile is all about and hear from people that have used it, succeeded with it and have the results to prove it.

At this one day event on Saturday, May 15th, a host of industry experts will be on hand to offer their hard won experiences. By bringing together a mix of developers, managers, Agile professionals, and technologists, the Cincinnati Day of Agile also provides excellent networking opportunities for its attendees. We hope you will join us to learn how Agile can make your software development process more effective, productive, and profitable.

More about the event can be found at http://cincydayofagile.org/.

BudgetSketch and Irregular Income

March 29th, 2010 by Bill | Posted in Budgeting, Good Advice

One of the most rewarding aspects of working on BudgetSketch has been the opportunity to share ideas with our users. We also get a lot of questions about personal finance and more. One of the more common questions is essentially, “How can I use BudgetSketch if I’m paid on an irregular schedule?” Admittedly, BudgetSketch seems tailored for regular incomes but we think it is well suited for self-employed users, those whose salaries are commission based, or anyone whose income varies significantly from month to month.

The key to any budget is to be thorough no matter what your pay schedule looks like. While we think BudgetSketch provides an excellent means of seeing all your monthly obligations in one simple view, you can use anything from a sheet of paper to a spreadsheet to list all your required spending for the month. To be extra thorough you should add the appropriate percentage of bills you pay bi-monthly and quarterly.

What you should have then is a minimum income you will need to earn every month from your various sources of income. If you are self-employed, then you should add about 30% to this to cover your tax obligation. For example, if your monthly obligations are $4,000 then you will need to earn about $5,200 ($4,000 X 30% = $1,200) in order to meet all your obligation and pay your taxes. Either way consider this total to be your monthly sales goal that you do not want to miss unless you’ve got a decent sized emergency fund built up in your business account.

This brings me to my next point. You should absolutely maintain a business checking account separate from your personal account. This will vastly simplify your business and personal tax filing each year.

You can use your business account to pay for legitimate business expenses and of course to pay yourself a regular income. Easy right? What could possibly go wrong? You know how much you need to earn each month. You’ve got a business bank account that you’re pouring your income into on an irregular basis. You’re making regular payments to your personal account from that business account. Oh wait, what if you don’t make enough money one month or two to meet your obligations?

Well, if you find that your missed your income goal one month then you’ll be showing a negative cash flow in your business account but unless you’re just starting out you should have accumulated a surplus in your business account over the months. Many irregular earners feast during the good months and starve during the lean months. To avoid the latter you should avoid the temptation to spend each month all the income you receive for that month. You must limit your payments to your personal account to your financial plan (AKA “your budget”).

If you’re just starting out or are preparing to, then we encourage you to save up, if possible, so that you can offset any start-up costs and deal with any initial short-falls as you’re ramping up your business. If you’ve been at this for a whole and if you are unable to accumulate a growing surplus in your business account then you have a bigger problem than budgeting can solve. You have a career problem.

You typically want to run when you hear a sentence like the one I’m about to write but… Take our word for it. We, the creators of BudgetSketch, are irregular income earners and we adopted this method of budgeting over a year of trial and error and it hasn’t failed us yet but as always we’d love to hear what works for you.

Simplicity is the Ultimate Sophistication

March 18th, 2010 by Dewayne | Posted in Budgeting, Good Advice, I Need a Plan, Uncategorized

Life can certainly be complicated. Juggling work with family responsibilities, combined with financial stress is all too common in many households. Notice I said, “can” be complicated. Many times we work against ourselves and make challenges into very complicated matters. Managing your finances is no exception.

I’ve been on a bent for the last several years to find ways to simplify my life. I look at my growing children and think, “How much am I missing because my life is disorganized?” Understand, I’m in no way qualified to be an expert in organization, but I do believe we can simplify our lives. Reduce the noise and the stresses, but continue to do the things that matter the most to us.

While I’m in no position to offer suggestions in many areas of life, one I feel very confident in is how to simplify money management. Recently, I came across an excellent article written by Jennifer Derrick at SavingsAdvice.com, where she talks about simplifying financial management.

Jennifer wrote:

When people set out to make a budget or adhere to a financial plan, they sometimes make things so complicated that they have no chance of success. They set up accounts at many institutions, they open ten credit cards to maximize the rewards, they make too many rules about what can and cannot be bought, and they try to divide their budget into too many categories. As a result, they end up with a financial plan that is too complicated and that even they don’t understand.

When a financial plan/life is super complicated, you don’t want to deal with it. The thought of balancing all those accounts, paying all the different credit cards and dealing with the rewards, tracking all the budget categories, and adhering to all the rules is exhausting. You may only be able to keep up with a complicated plan for a month or two before you throw up your hands, declare it’s all too hard, and give up, leaving your finances to go their own way (which is almost never in the direction they should be going).

This is why it’s important to keep your financial life as simple as possible. The simpler something is, the more likely you are to keep up with it and actually live by that plan. When dealing with your accounts and your budget is easy and not too time consuming, you’re more likely to find time for it instead of putting it off.

Jennifer couldn’t be more right! Managing your finances is not something that should be complicated. You may have some complex financial issues to solve, but a simple plan is the most effective way of unraveling that complexity. If you’re committed to losing weight and improving your health, a complex diet and exercise plan won’t be sustainable for most people. Same goes for effective personal finance management.

The place to get started is a simplified financial plan. BudgetSketch was specifically designed to simplify the management of your finances. Get started by creating a budget and getting a visual of your financial situation. Remember, keep things simple. Reduce clutter and complexity, and begin to feel empowered again! I know you can do it!

We are pleased to announce the support of International Currency!

October 21st, 2009 by Dewayne | Posted in Features

We received an overwhelming number of requests for this feature and wanted to release this quickly. Whether you’ve already setup your budget or you’re just getting started, follow these simple instructions to set up your desired currency:

1.) Go to your “Account Settings” page.
2.) Currency selection can be found under “Currency Preferences”.
3.) Type in your currency “Unit”. (You may use text or a currency symbol)
4.) Type in your desired “Delimiter”. (where you want the commas)
5.) Type in your desired “Separator”. (where you want the decimal)
6.) Select the “Format” using current values. (how you want things to look)

Once you select “Update”, your currency settings will be set. If you already have budget entries, those will reformat to your desired currency settings.

Coming soon… support for for more recurrence intervals. (weekly, bi-weekly, quarterly, third Thursday of the month, etc.)

Happy Budgeting,
The BudgetSketch Team

The Debt Free Vacation

September 9th, 2009 by Dewayne | Posted in Budgeting, Good Advice, I Need a Plan

I recently read an article by Sadie Morris talking about this subject on her A Life Without Debt blog. No, she’s not talking about taking a “vacation” from your debt free plan, but about how many people do incur debt just to go on vacation.

My wife and I love to travel. We love seeing new places and certainly getting away from life’s normal schedule. To be honest, we haven’t taken a “qualified” vacation since 2003. By “qualified” I mean a vacation that costs more than $500 and lasts more than a weekend. We have been working hard over the last number of years to overcome past financial ~~disasters~~ decisions, and allocating funds to vacations just hasn’t been a priority.

Now… I know the common argument, “you’ll burn yourself out if you don’t take a vacation.” While I’m sure there are studies out there to prove this point, should a person that is working to payoff debt decide to incur debt to take a vacation? That certainly depends on the individual and how committed they can make themselves to paying off any debt incurred. I would assert that if you are truly inspired to be debt-free, it might be hard decision to incur debt for a vacation.

So where is the balance? How can I make a vacation happen and still feel good about my financial plan and not sacrifice my promises to myself?

Decide how you will allocate vacation funds. In my house, we haven’t allocated any funds to this category since 2003 because we haven’t been able to get past other priorities with any funds left to allocate. Next year is shaping up to be our first year that we will plan a vacation that costs more than $500 and lasts longer than a weekend! As we plan, we will use the following guidelines to make our 2010 vacation successful and not compromise our promises to ourselves:

We have to decide to pay cash, and not incur debt. I can assure you right now, if we wanted to go to the Bahamas’ next year, there is no way to do it unless we incur debt. So, making a decision based upon priorities, we have decided that any vacation must be paid in full with cash. Sorry Bahamas!

Picking a destination is also important. Many people will select the destination, then decide how they will pay for it, or in a lot of cases, finance it. Set a dollar figure that you know you can attain, then select destinations that will fit the bill so to speak. We have a short list of places we would like to go, but we won’t make a decision until we know we will hit our vacation savings goal. This keeps us from over extending ourselves!

We also must decide if we will take several smaller trips through the year, or use all our funds on one nice vacation. Don’t get caught in the trap of finding that you have spent your vacation dollars throughout the year and end of “having” to put the planned trip on a credit card. Traveling debt free can be done, but not without proper planning and discipline.

Speaking of planning… I use BudgetSketch to help me plan for vacation. (there’s my shameless plug!) I have a goal entered into the system called, “2010 Vacation Fund”. I have set the goal amount and I track each month how much money I am allocating to it. I simply allocate a portion of each month’s surplus to the fund… but I do have funding priorities. I have other goals that are higher priority than my vacation goal. Things like emergency fund, car maintenance fund, medical deductible, etc. I fund all of my goals as a list of priorities. Given this, my wife and I have forecasted we should be able to fund all of these goals and still meet our vacation goal.

Since we are committed to not incurring debt, should one of our other goals have a higher priority need and require additional funding, i.e., an unforeseen car repair that exceeds our allocation to that fund, then in our case, the vacation fund will suffer a bit, unless we can make up some ground somehow. In years past, we would have told ourselves, “We know the transmission was unforeseen and it cost more than we expected, but we owe it to ourselves to take this vacation anyway because we have worked hard!” “We’ll make it a priority to payoff the credit card we use!” Famous last words…

If you can manage your credit balances well, and I have friends that are excellent at this, then it’s always an individual choice to finance your vacation with debt or go debt free. However, no matter your choice, I can assure you, paying cash is much cheaper and whole lot more rewarding.

We would love to hear about your experiences or good tips on how to have fun on your debt free vacation!

THE WINNER!! iPod Touch Giveaway…

July 7th, 2009 by Dewayne | Posted in Uncategorized

Congratulations to Budgetsketcher Michael H.!!! Based upon the contest requirements and a random selection process, Michael was selected as the Winner of the BudgetSketch iPod Touch Giveaway!!

Contest:Calling All Spreadsheet Budgeters!! Win an iPod Touch!!

All of us at BudgetSketch would like to extend our thanks to Michael and to all of our users who participated in this contest. We received a lot of valuable feedback and have cataloged some very useful suggestions!

We’re always eager to hear from our users, so if you feel compelled, we would love to hear more about how you use BudgetSketch and how we can make it more useful. You can contact us here at our blog or at Budgetsketch.com.

Once again, congratulations to Michael! We hope you enjoy the new iPod!!!

Sincerely,

Your friends at BudgetSketch

“We are a small but dedicated team building BudgetSketch the “old fashioned” way, slowly and economically.”

Using Predictability To Your Advantage

June 4th, 2009 by Dewayne | Posted in Uncategorized

BudgetSketch is all about sound planning… all about intentional money management. We built our budgeting software around the idea that in order to use predictability to your advantage, you need to plan ahead. Now… some think planning ahead means things like retirement planning, or anything that involves long range goals. Not so! Our system requires people to look at the next month or two and decide what to do with their money.

We all know our recurring expenses, and it’s nice to see those laid out for us, but what about all the stuff each month that falls under the ambiguous miscellaneous expense column? How do we get a handle on the expenses that we forget about or catch us by surprise? How do we properly manage our cash flows each month so that we handle life’s expenses and still meet our financial goals? Intentional planning is the key!

Jennifer Derrick, author and blogger at SavingsAdvice.com is a person who gets it. She recently blogged about the principle of Use Predictability To Your Advantage: Planning Ahead Saves Money, where she expertly describes a number of ways to save money by “looking down the road”. I encourage you to read the full article, but here are a few of her ideas that can be easily applied using BudgetSketch:

Know your bill pay dates and deadlines to make sure you get payments in on time and avoid late fees. They’re often the same month to month, so it’s easy to plan for this.
You know Christmas is coming, so save a little each month to avoid a big money hit in December.
Plan summer and weekend activities/entertainment for the kids so you have time to buy supplies on sale, enroll them in programs (at early registration discounts), pre-purchase tickets at a discount, and get up to speed on specials like free summer movies at the theater or kid’s days at local attractions.
Plan back to school shopping and buy as much as you can on end of season sales the year before and on tax-free holidays if possible. Paper, pencils, crayons and glue will last into the following year.
You have a general idea of when you need to buy things. Maybe you buy pet food once a month, laundry detergent twice a month, cleaning supplies every two months, etc. You know when it’s time to start thinking about buying more, so watch the sale flyers and plan your purchases to take advantage of sales. It beats running out to buy pet food at the highest price because you waited too long and now Fido is out of chow.
Similarly, you know when big things start to look like they need replacing or repair. The warning signs are usually clear. You can tell the car is on it’s last legs, you know you need a new computer because yours is too slow, you know the couch is developing an uncomfortable sag, and you can tell when the oven just isn’t heating right any more. Use those early warning signals and start looking for the best deal on repair or replacement, rather than waiting until the item is totally dead and you have to buy a new one at full price immediately.
You know that things like insurance payments, vet visits, and taxes occur at certain times of the year, so look ahead and save a little for them each month to avoid being shocked when the bill comes due.

Using good ideas with the right tools is the only effective way to manage our own micro-economies. What other ideas can you think of that fit the principle of using predictability to your advantage?

Personal Budgeting