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Budgeting and Automation: Streamline Your Finances

Written by Laura Martinez - 18 Comments

Budgeting can be a daunting task. It takes time and effort, and it’s not necessarily fun. The keys to having a successful budget are to make it: (1) realistic, and (2) easy to maintain. Some people mistakenly assume that having a budget means cutting their expenses to the bone and hoarding their money for the future, but that’s simply not the case. Likewise, maintaining a budget doesn’t have to be an onerous task. The ideal budget helps you to stretch your dollars further without taking up a huge amount of your time.

Build a Realistic Plan for Your Budget

Cutting everything fun out of your budget does you no good. People who drastically deprive themselves almost always revert to their old habits. It’s just a matter of time before you lose your resolve. Instead, try these tips.

Track what you spent last month. Review your bank statements either online or on paper. See where your money went. If you want to make it easier to track your expenses, try a money management program.

I use Mint (it’s free!) to provide online snapshots of our accounts. It can show the data with a list of transactions and categories or, if you’re more visually inclined, there’s a tab that lets you examine the data in a pie chart.

Look closer at one or two expenses that you want to change. For us, our weakness was eating out for dinner. We looked at six months of data and noticed that we were eating out way more than we thought. To rectify this situation, we set a goal to cut back, but not eliminate, going out for dinner.

We also don’t try to tackle multiple goals at once. By focusing our efforts, we’ve been able to cut back on expenses and still enjoy a romantic night out.

Review your budget regularly. It’ll take time as well as some adjustments to develop a budget that works for your family. Once you find your rhythm, you can check it less often.

Automation Can Help You Stick to Your Budget

Automating your finances can help you “lock in” certain aspects of your budget and decrease the likelihood that you’ll go astray. Here are a few tips.

Have a portion of your paycheck transferred to a high interest savings account. Start small, on the order of 5-10%, and use automatic transfers to move that money into your saving account. You probably won’t even miss such a small amount.

I use ING Direct for my savings. The main reason for this is that I can easily create sub-accounts. This allows me to not just save, but to save for very specific goals.

For example, I have one account where I’m saving to eventually replace my car. I just started this account, so it’s small. Over time, however, the automatic transfers will build it up. These sorts of transfers work well with a budget, because I can set aside a defined amount on a regular basis rather than getting hit by a huge expense all at once. Anticipating your financial needs can save you lots of headaches.

Here are some possible saving account goals:

  • Vacation fund
  • New television/electronics
  • Semi-annual expenses like renter’s insurance

Set up free online billpay with your bank. Most banks and credit unions offer free online billpay with your checking account. If you’re willing to set aside an hour or two to get your all bills entered, you can reduce your time spent paying bills to 15-20 minutes month. On top of this, you’ll save on postage.

It took me an hour to get our bills entered online. I just sat down with a stack of our bills and entered the accounts, address, and dates into bill pay. For “fixed” bills that are the same every month, I set them to be automatically paid one week before their due date. For bills that change form month to month, like the electric bill, I just login and type in the amount – it takes less than two minutes.

Take advantage of your company’s 401k program. It may be off in the distance, but eventually you’ll be retiring, so… Investing now makes good sense. If you’re just getting started, then try to invest at least a small amount on a regular basis — just like with your automated savings (above). You can always increase your contributions in the future. How much should you save? Try to set aside at least enough to receive your company’s full match — that’s free money, so don’t turn your back on it.

What About You?

Do you budget? How do you handle your bills? Have you automated your saving/investing? If you have any tips or tricks, please share them in the comments.

Published on April 1st, 2009
Modified on September 27th, 2013 - 18 Comments
Filed under: Miscellany

About the author: helps families achieve financial freedom by sharing tips for reducing debt and building freelance income over at Couple Money.

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18 Responses to “Budgeting and Automation: Streamline Your Finances”

  1. 1
    Baker @ ManVsDebt Says:

    Very nice article! I will agree 100% that tracking your expenses makes budgeting that much easier. The most important factor for me was making my budget more simple. At first, I tried to have a million categories for a million different things. It wasn’t until I simplified my budget, that it really started to click. Don’t get paranoid about having things exact, the important thing is to DO it and make small adjustment as you go!

  2. 2
    SpriteMV Says:

    I don’t fully understand the value of free BillPay services. I keep reading how they help you save so much time paying bills each month, but for bills that vary month-to-month, you still have to log in and enter the amount.

    All of my bills accept either credit card or electronic payments if I log into each company’s website (are they really any that don’t offer this service anymore?). Isn’t it easier to configure the automatic payments from the company’s site, rather than your bank’s site, so you don’t even have to log in to enter an amount?

    The only value I see for online BillPay is the ability to mail physical checks to friends/relatives/landlords who obviously don’t accept online payments (which is actually really nice).

  3. 3
    OblivousInvestor Says:

    My wife and I don’t really budget, per se.

    Rather, we track our spending very closely (thanks Mint.com!) and then check monthly to make sure our spending is roughly in line with our goals and priorities.

    Perhaps that’s a somewhat lazy system, but it works as long as you’re paying yourself first and living off the rest.

  4. 4
    Jason Unger Says:

    Great post!

    Financial automation is the way everyone will be managing their money soon — it’s such a time saver and you don’t have to worry about remembering to pay the bill, save for the future, or invest for retirement.

  5. 5
    savvy Says:

    I have a sort of ‘reverse budget’. I figure out how much I want to contribute to various goals (i.e. retirement savings, freedom fund) and do that off the top. After that bills get paid. Whatever’s left is mine to spend as I choose because the important things have already been taken care of.

  6. 6
    Bill Says:

    Excellent advice!

    The first paragraph says it all, realistic and simple; two keys to creating and sticking to your budget.

    The comment by savvy is a bit telling. So many people define budgeting as expense tracking that some folks, like savvy apparently, seem to think they’re “reverse budgeting” by planning first and then tracking expenses. I contend that savvy is doing it the most effective way.

    We could disagree all day on whether expense tracking or budgeting should come first but the important part is that you do both; have a plan (budget) and monitor your adherence to it (expense tracking).

    Again, great post. In this day and age, there can’t be too many posts underlining the need for budgeting!

  7. 7
    GM Says:

    Also, if both husband and wife work, try to live off one income if that is possible/practicable. That really accelerates the savings.

  8. 8
    craig Says:

    Right now I mentally automate, meaning when the check comes in I automatically set aside money into savings before anything else. I should set some type of automatic transfer though to not even have to rely on myself to make the decision, a lot of people recommend it.

  9. 9
    Laura Says:

    @All: Thanks for your feedback and also sharing what has been working for you. I think many people are defensive about having a budget because they imagine it as a ball and chain. You don’t have to track every penny, but you should have a clear picture of how much you spend on things.

    @SpriteMV: It’s personal preference. I’d rather login from one location and spend a minute or two adjusting amounts. Plus some companies like mortgages, insurance, and others charge a fee ranging from $5-15.

    Plus if you sent it out from your side you don’t have to worry about a company withdrawing the wrong amount and you have to wait until its resolved to get your money back.

  10. 10
    Danielle Says:

    Budgets might not be all about cutting expenses to the bone and hoarding for the future… but often when people look closely at their money and where it goes there is a lot of shame.

    I am not sure what kind of rock bottom my husband would have had to hit before he would have started to turn his finances around, but it took getting married to me and having me track everything to get him “on the wagon” so to speak. Don’t get me wrong, we were BOTH far, far off the wagon.

    So for anyone reading this that feels that same way, hang in there and just DO SOMETHING, one little thing, every month.

    Here was my baby steps which I started in 2007, but there are MANY paths to success.

    Month 1: Make our main accounts joint and record the combined amounts of assets, debts, list all basic monthly bills. Set up a place to keep track of these amounts.

    Month 2: Decide how much excess money we could contribute to our debts, and start paying it towards our highest rate credit card (just pick a place any place). This number gets refined a lot, but you have to start somewhere!

    Month 3: Automate bills (this actually took MONTHS to complete). I couldn’t believe how much a load off of my mind this one step accomplished. I went one step further and used a separate checking account from our regular one for JUST bills, so everything left in our main checking account was our discretionary spending.

    Month 4: Analyze and implement a more comprehensive debt payoff strategy. Used previous month history to estimate other monthly expenses like gas, groceries, etc. Added to my spreadsheet from Month 1 to calculate $ going in vs $ going out. In our case we were spending about 700 more than our income brought in each month. Continually work to keep that number positive by adjusting your spending.

    Month 5: Set up an online bank account and a small transfer each payday (one for long term emergency fund, and one for short term expected things like gifts, holidays, car repairs). Never mind if this amount doesn’t really cover it, just get it started!

    Month 6+: From here on out we just took it month by month and figured out what our next priority might be. Increasing our savings, long term financial goals,college savings plans, 401K contributions, saving money in a certain area whatever the case may be and tackle it one at a time!

    I also started an every 2 week meeting where my husband and I could cover financial stuff. I was driving him crazy by talking about it 24×7 so it was a good solution. I knew I could let it go the rest of the week because I would get my chance to get his input and talk during that meeting.

    So anyways, sorry for the long post, but I think even the comments on a post like this can intimidate people sometimes.

  11. 11
    Laura Says:

    @Danielle: Great job! I love how you broke it down step by step. I hope it continues to get better. :)

  12. 12
    DDFD at DivorcedDadFrugalDad Says:

    Good post and advice.

    I love streamlining and automating– in every aspect of my life, so that I have the time to spend on the important stuff . . .

  13. 13
    Ndoublel Says:

    My husband and I have a hard time budgeting. He is not very good with the finances so we both have seperate accts in addition to our joint. The bills are on autopilot in the joint and the seperate accts get the surplus automatically from dir dep. No savings acct b/c the seperates are drawn on Valley Bank Roanoke Va which gives us 4.99% yield each mo. I’m trying g to teach him to block off a set amount each month and forget about it. Wish me luck

  14. 14
    Laura Says:

    @ Ndoublel: I hope it goes well. Maybe you can try a very small amount like $50/month to test the waters for him?

  15. 15
    ndoublel Says:

    Laura,
    We decided to have a race to the end of the year to see who can save more for bragging rights and a nice dinner. We have evened out our bill obligations so we both have roughly the same ‘mad’ money and the race is on.

  16. 16
    John Says:

    After months of serious trial and error, I think I have created the perfect Automated Budget. Every bill gets a set amount of money, no matter how much the bill is for. I do all this with Online bill Pay. I was able to do this because I tracked my bills for a year and was able to come up an average for the variable bills. I then split them all in half and pay them every two weeks when I get paid. Yes, I build surpluses in these accounts but I have the piece of mind they are paid every month automatically at the same time every two weeks. My budget never changes, except if an emergency occurs and this is also covered, because I automatically transfer a fixed amount from checking to my Emergency Fund each pay check. This is all done before I spend a dime out of my living expense allowance and yes this is the same amount every two weeks also. I maintain a fixed surplus amount in my Checking Account and try never to go below that amount, this in itself helps me budget. This budget system has made my financial and personal life so much happier. I’m completely debt free except my mortgage and loving life to the fullest. Before I was debt free, I applied the same strategy to pay off all my bills starting with the smallest to the largest (Dave Ramsey Snow Ball) but again I stuck with the Online Bill Pay keeping it automatic.

    Good luck to everyone and I hope all of you can be in the same place I am in. Keep the faith.

  17. 17
    Jerry Says:

    Hi,
    Anyone have a good affordable recommendation for software that can upload my bank transaction file for the purposes of trending and budget formation?
    Mint or budgetsketch are not viable options for us.
    Thanks

  18. 18
    Steve Says:

    Jerry,
    Try bank2budget. They have a 90 day free trial. Check to insure they interface with your bank already although their is an option to register your bank with them so they can configure the upload. The installation is a little clunky but I find it very instrumental in tracking our cash flow. Now we spend about 2 hours a month paying bills and keeping our expenses/revenues tracked and measured.
    Good luck, Steve

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