Budgeting is hard. Don't bother!

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When you hear the word “budget,” does your brain get thrown back into the foggy haze of tenth-grade algebra class, when the clock seemed to slow to a complete stop? Or worse, do you find yourself back at your algebra final, panicking over the red letter ‘F’ you could already see coming on your report card? You’re not alone.

Budgeting — and budgeting software — can be completely overwhelming. You finally decide to get your finances in order, you sit down to learn how, and the next thing you know you’re being asked to give a precise, to-the-penny guess for your lunch spending for each of the next 12 months. Um, $87.45? The joy repeats every month of the year, when you get to “rebalance” your budget to correct for your imprecise guesses. Hang on, let me spend five years becoming a Certified Public Accountant, and then I’ll get right on that.

For some people, a full budget of this kind is exactly the tool they need to keep track of their finances. I’ve met people who can tell me within a dollar how much they have left to spend on food for the month. Tracking every cent gives them a feeling of full control, and spending the time that takes to maintain keeps them focused. But I would estimate less than half of a percent of the people I’ve talked to about money management fall into this “amateur accountant” category. The rest of us need something easier — something that doesn’t require certification to operate.

targets

I’ve long advocated what I refer to as “hot spot budgeting” instead. Choose a couple of areas where you know you have trouble keeping your spending under control. Then focus your attention just on those targets. If you have trouble with a couple of areas, do one at a time instead.

Why does this work? Most of your regular expenses are fixed or non-discretionary — for instance, your rent or mortgage probably don’t vary every month, nor do most of your bills. A few, though, are relatively easy to change, and are big enough in your spending that changing them has a big effect. For me, it’s restaurants — when I eat out a lot, I have a bad month, and when I don’t, I have a good month. Likewise with books. If I keep my spending under control in just those two areas, the rest of my “budget” is painless.

Wesabe has long had a feature called “spending targets” to help you do hot spot budgeting. It has, though, been one of our best-kept secrets. Finding the feature (which was hidden in a drop-down menu on the spending summary page) was nearly impossible, and it was subtle enough in the interface that getting updates and keeping on track was tough.

Today, we changed all that, and made targets a ton easier and a lot more visible. You can now set and view your targets right from your Accounts home page, in a lovely set of graphs designed by our graph wizard, Tim. (These graphs are made completely in Javascript — no Flash plugin required.) You can view your targets in big, clear text; as pie charts; or as bar charts. Go ahead and add a couple and see how easy it is.

Also, when you’re just getting started with targets, seeing a big red mark on your home page when you overspend can be very discouraging. By default, we won’t show you overspending on targets — your graph will just show “$0 left” when you reach the amount you targeted. However, some people like seeing how far off they were in their guesses, so we’ve added a “show overspending” toggle. Click the gauge icon (the one that goes into the red) to enable display of overspending.

I’ll admit that I actually liked algebra, but I’ve never liked budgeting. Spending targets — focusing on just the “hot spots” in my budget — work for me in a way that budgets never did. Give it a try and you’ll see why. And nice work, Tim, in getting this great feature the exposure it deserves!

5 Responses to “Budgeting is hard. Don't bother!”

  1. twitter: meryl333 Says:

    You tips are sensible. Once you write down and actually track everything you spend, money gets saved. Amazing how much is spent w/o being aware. I find myself making decisions about buying really unhealthy things (is it worth it?) just by paying attention.

  2. Zara Green Says:

    Great Post! I certainly know my “trouble spots” and would rather focus mostly on those, than stressing over the whole. Thanks for giving me permission 🙂
    Zara

    @ZaraGreen on Twitter

  3. Budgeting for Your Network Marketing Business | Network Marketing Training | MLM Training Says:

    […] Wesabe: Your money. Your community » Archive » Budgeting is hard … […]

  4. Design: a journey not a destination | AccMan Says:

    […] As we move forward and draw lessons from the relatively simple web service style applications that are emerging, I sense the business software industry will have to pay way more attention to design than it does today. Consider for example Wesabe’s approach to budgeting. Budgeting — and budgeting software — can be completely overwhelming. You finally decide to get your finances in order, you sit down to learn how, and the next thing you know you’re being asked to give a precise, to-the-penny guess for your lunch spending for each of the next 12 months… […]

  5. Dan Dieckmann Says:

    I follow the same methodology. I have blog http://dandi2008.blogspot.com/2008/12/organize-your-checking-accounts-to.html that I wrote how I track the variable expenses. I set up a separate checking account to pay my fixed expenses and another to pay my variable expenses. I put all my attention to the variable expenses. Read my blog to see how I do this.

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