How to Create a Budget

by Jason Unger

Woman budgeting on laptop

This is an excerpt from Day 7 — “Create a Budget” — of Automatic Finances: 17 Days to Your Financial Freedom.

Budgeting can be the most important act for anyone looking to get better control of their finances.

With a budget, you establish

  • exactly where your money is going
  • how much you will be saving each month
  • the right amount to spend in certain areas

Thankfully, Yodlee and other account aggregators make it simple to set how much money you want to spend and how much you should expect to spend in each category.

Using Yodlee For Your Budget

After you log in to Yodlee’s MoneyCenter, click on “Spending Reports” and then “Set Budget Goals.”

Now you see a page breaking down your expenses by category, with an open form next to each category where you can input your monthly amount.

First, go through and add in all of your fixed costs — the monthly services and products you pay for on a regular basis. Since you know how much they’ll be, you can put in the specific amount it will cost and move on.

Next, scroll down to the “Income” section. Add in your Expected Monthly Income into the Paychecks/Salary field.

After that, go to the “Transfer” section. You’ll use the “Transfer” category as your once-in-a-while fund. Input your monthly set-aside and click “Save Changes.”

Setting Your Flux Spending Goals

In order to budget properly for your flux expenses, let’s take a look at how you’ve been spending in the past.

If you categorized six months of your transactions, Yodlee will actually show your average monthly spending amount for each expense over the last half-year.

If you have fewer months categorized and a number of uncategorized transactions, head over to the “Expense Analysis” page (with the pie chart we saw yesterday) and select the time period you categorized.

Using this as a basis, you have a pretty good idea of how much you spend in each flux category per month.

But instead of making your goal equal to the average you spend in each category, decrease it by 10%. This gives you a goal to reach for to decrease your spending and increase your savings.

You don’t have to fill out every category with a goal ? if you don’t have any kids, you wouldn’t budget for Child/Dependent Expenses ? but do as many as possible.

Some categories may be covered in your once-in-a-while fund, like Insurance or Taxes, so leave them blank; you’ve already accounted for them in Transfers.

To find out how to budget for savings and automate your entire financial life, download the ebook now.

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