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A Budget Toolkit?

Question: Can you recommend a good online budgeting tool? Suzanne, Thiensville,WI

Answer: My favorite budgeting quote:

Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

It's from David Copperfield by Charles Dickens.

There are a couple of good ones. Quicken Online is geared toward tracking where your money is going. (There are also the various Quicken personal finance software packages.) Others swear by Microsoft Money Plus. I have heard good things about Mint.com, but I haven't used it myself. There are plenty of good budget worksheets online, too. A basic one is offered for free by the Consumer Credit Counseling Service of San Francisco at www.cccssf.org. (It's under "forms".)

However, I know far too many people who have paid for a sophisticated computer-based budgeting tool only to have it gather cyberdust after a few months. The software and online programs work for anyone with a good reason to track their spending and saving patterns on an ongoing basis--and in detail.

But for a lot of us out to create a household budget, pen, paper, and a calculator is enough. It all depends what you're trying to do.

Whether you go online or use a notebook, the chore of creating and sticking to a budget is worth it. A household budget is the starting point for taking control of your finances. It's the baseline for all your saving, investing, spending, and giving decisions. Without a budget it's harder to control risk. Instead, you're more financially vulnerable to a sudden setback, such as car failure, job loss, or an illness. A budget is really where values are transformed into reality. The real payoff from a budget is when you spend your money where you want, and save for what you would like to do with your money.

Most of us don't need to spend an enormous amount of time tracking data. For a relatively small investment in time and effort upfront, a budget should become a lifetime of good financial habits. At that point, ballpark figures and estimates--with the aid of automatic bill paying and automatic savings programs--is enough.

In an interview I did several years ago with Eric Tyson, author Personal Finance for Dummies (and a number of other finance books) we talked about a couple that was making a budget, and they were eager to do all kinds of data entry on the computer. Tyson's response was "do they really need to be tracking all of their spending on a monthly basis? Because if they set a specific savings goal like we are going to save 10% of our income or 8% of our income each month and they are able to do that, then my feeling is who cares where it goes after you have accomplished that savings."

I vote for keeping a record of your spending for several months to find out where your money is going, and use that for creating a working budget. But once you have one, with time it's no longer necessary to minutely follow your expenses--unless there's a good reason to do it.

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