Budgeting Made Easy

BudgetingI recently researched and tested 3 different personal budget applications: HomeBudget, YNAB, and Expensify.  The goal was to find an app that clients and I personally could use for budgeting. Budgeting is much different than saving.  Saving is income not spent, or deferred consumption, e.g. money set aside to grow and eventually spend during retirement. On the other hand, budgeting is managing expenses to fit a given income. Each application has their advantages and disadvantages but they are all great when it comes to keeping monthly finances in order.

YNAB:

YNAB, or “You Need a Budget” is the first app I reviewed. For starters, YNAB links to a checking account, which is a plus because income does not need to be updated manually, it is done in real time. After monthly income has been set, every dollar of the previous month’s income is assigned to a specific category within the app. Categories are: Immediate Obligations, True Expenses, Debt Payments, Quality of Life Goals, and Just for Fun.  This app is different in the idea its goal is to use the previous month’s income to pay for the following months expenses, rather than most budgeting applications that use any funds available to pay off expenses. This app also stresses the importance for having cash on hand for emergencies or unusual expenses. Rather than only paying off the expenses you planned on having, YNAB makes sure a predetermined amount of cash is set aside for a rainy day. A fallback to YNAB is it is not the simplest app to navigate through and takes some time to get used to. It takes about 2 weeks to get totally comfortable, which is most likely the reason for the 34-day free trial. After 34 days, the cost is $5/month or $50/year.

Expensify:

What first caught my eye about Expensify was the price. It is free. Expensify links to individual credit and debit cards to keep track of expenses so you do not need to enter them manually. This way you will be able to keep track of expenses without having to hang on to every receipt. At any time you can export expense reports or send invoices directly off of the mobile app. Expensify can also keep track of things like “Distance” for people who need to expense travel costs and “Time” for people who are paid on hourly wages. A fallback, however, is Expensify is not a true budgeting tool. So, while you will have a better idea and an easier time keeping track of expenses, you cannot pre-set a budget for individual categories.

HomeBudget:

This is my favorite application from what I tested. It is very simple to read, colorful, and easy to navigate. When first entering the app, five sections appear: Expenses, Income, Budget, Accounts, and Bills; along with the dollar amounts of each (once you enter them). Below the sections, you see a gauge showing how much of your monthly budget you have spent and a month by month trend for expenses. It is like a condensed expense report summary right on the home screen. This app is very flexible and allows you to enter income in a variety of ways. Within the income tab, you select the add button and an “add income” tab pops. Whether you have a steady paycheck and title each check as “bi-weekly paycheck,” or you are a free-lancer and title it as “John Smith” because a client made a payment, you will be able to utilize a detailed description of income and what account it is going to. The same detail is available within the Expense section of the home screen. There are seven categories (Utilities, Food/Grocery, Departmental, Entertainment, Car/Auto, Insurance/Medical, and Misc/One-Time) all with subcategories. This allows you to keep a detailed record of all expenses.  Within the budgeting section, you can either take a broad approach, or an extremely detailed one. A broad approach would be selecting the “One-Budget” option within the Budget section of the home screen. This is for anyone who doesn’t mind where they spend a monthly budget, so long as they stay under the predetermined amount. Other people, who prefer to be more detailed, can go in and set individual budgets for each category or even sub-category. With this approach, you can see how much of a category budget has been spent for the month and if you click on a category, you can see how much has been spent on each sub-category. HomeBudget is by far the most hands on, detailed and efficient application I reviewed. However, there are a few drawbacks, the application costs $4.99 on iPhone/$5.99 on Android and does not connect to a card or bank account to easily keep track of expenses.

In my opinion, the HomeBudget app in conjunction with your banking app that keeps track of expenses is the best solution. Personally, I utilize my bank’s mobile app for tracking all the expenses against my checking account. If you don’t have something like this for your checking account, you may consider downloading something like Expensify and linking your credit/debit card. This way it will be much easier to enter expenses into a budgeting application like HomeBudget.

We can change how we think of budgeting.  In the end, it is not about spending as little as possible.  It is about having a plan for wisely spending what we have to meet all of our goals.  These applications are a great tool to help us make sure we don’t overspend and, more importantly, to make sure we continue to enjoy living the life we want to live.

*Other budgeting applications with good reputations I did not get a chance to review: Mint.com, GoodBudget, Mvelopes, Simply Planning, BillGuard, and Pocket Expense