How to use personal finance software right

Many people believe that keeping track of personal finances is boring and complicated. Actually, it’s not. The problem is that most of the beginners are trying to do this in detail and they spent a lot of time on minor expenses. Of course, they get tired quickly and come to a conclusion that home budget is not their cup of tea.

Step One: Home Accounting is Easy

Trying to keep track of all minor expenses is the most common mistake. In fact, you don’t need to enter all your expenses in detail. Instead focus on what actually matters to you. Take control of several essential categories, such as food (the average family spends most money on food), regular and fixed payments (rent, phone, transport and loan), belongings (clothes, furniture and utensils), entertainment (alcohol, cafes, movies) and other things (including all unplanned expenses such as presents). The latter two categories need special attention because you should carefully monitor them and cut down, if possible. Of course, it’s not that easy to reduce expenses on food as you have to eat less. We cannot do that, at least not so quickly.

Later, when you get comfortable with personal budgeting, you can split essential expenses to smaller ones. For example, you can split food to essential and unessential, namely candy, chewing gum and soda. You can use this approach to split the Belongings category so that you have essential and unessential items (actually, unnecessary things bought impulsively). Keep the second category under control and even reduce it a little but without fanaticism because we are all human and we all have our own weaknesses. Well, and so on. You can split categories to infinity but this is for professionals in home budgeting. Beginners should focus on a few essential categories.

Myth one. You need to monitor every penny. It’s time-consuming, boring and tedious but you cannot do without that.

In fact, that’s not true. You need to control big expenses, using 4-6 essential categories, no more.

So, let’s bust myth one. You come home from a supermarket like Auchan with a cashier's receipt as long as 1 meter. Is it really necessary to spend the whole evening on entering all the figures to the program? Of course not! Focus on essential expenses, for example, you bought a couple of beers in the evening and a bottle of whisky for the upcoming Christmas and New Year holidays, one stool for the kitchen and lots of food. You remember that without any cashier's receipt, don’t you? So all you need is the total amount of the receipt, which is easy to obtain if you already keep track of your home budget. Simply subtract the amount of money in the wallet from the amount in the program. As you see, we do not really need a cashier’s receipt. We can easily calculate how much we spent today and we remember the price of the beers and whiskey by heart. Also we remember the cost of the stool because we checked it before the purchase (as you know anything may happen these days and a cheap-looking knick-knack may turn out to cost like an airplane at the checkout). As a result, we enter only three things into the program, namely alcohol, stool and food. And do not be afraid if you also bought socks, but foolishly forgot about that and this purchase is included into the amount for food. Practice shows that such trifles do not distort the overall picture. Just forget about it. Next time you’ll buy a set of screwdrivers, an electric fretsaw, plus a kilo of potatoes on the way home and, certainly, forget about the potatoes and enter the entire sum under the Belongings category.

Myth two. You forgot to enter something and everything went awry.

That’s wrong. Actually, everything’s fine as potatoes compensate socks. Always. They are somewhat interchangeable.

So, we spend a few minutes in the evening to enter expenses and in return get full control over household budget. That’s a good deal, right? One more good habit is to count money in the pocket once a week and check it against the amount in the program. If these two sums do not match, try to recall what else you bought last week and adjust the balance. As a rule, unaccounted items are food and entertainment (chewing gum, soda and beer). These two categories are like a black hole where you should look for the lost money.

Step Two: Planning

You need to spend your time on budget planning, rather than rigorous entry of receipts and minor expenses into the budgeting software. This part is the most important and interesting in home budget.

Plan everything. Let’s say, for example, winter is gone and your old winter boots are completely worn out and the jacket is not good to wear any more. You need to buy a new pair of boots and a jacket for the next season. Enter this future jacket and boots expense into the program somewhere in early October, specify the approximate amount, and you will never find yourself in the summer shoes on the first winter snow.

Myth three. Home budgeting means recording all expenses and that’s all.

Not quite, planning budget is much more important. Planning prevents you from being penniless at the most inopportune moment.

Plan everything. Soon you will have a crystal-clear picture of your financial situation, both current and future. You’ll see how much spare money you have now, how much you can save for the vacations, how much you will spend in the nearest future. Not enough? You thought you could save for the vacations on the islands this summer? What to do? Well, there’s a solution. You can take a loan and fly to the Maldives and forget everything. Anyway you’ll have to repay the loan later and now is the time for having fun. Of course, this is a joke. Taking a loan for vacations is the biggest financial mistake that you can make. But there’s a way out. Let’s move on to the next chapter.

Step Three: Cutting Down Expenses

So now we feel the pulse of our financial health. We control budget and plan the future. Now it’s time to cut down unnecessary spending and build reserves for a rainy day.

Myth four. No program can help to spend less. You just need to earn more.

Well said! Actually, earning more is not easy as it seems. As practice shows, the salary grows slowly, and expenses skyrocket quickly. It seems like you earn more now but still there’s not enough money. It flows away. Something should be done about it.

As I already mentioned in the beginning, we need to split expenses into smaller ones. Split food to necessary and unnecessary. Do the same with clothes. Then start tracking budget in more detail. This means you’ll have to do a little more work, but since you're already comfortable with the program and do everything quickly, it will take only a couple of minutes a day. You'll quickly discover that most of the money is spent on the unnecessary things. You're not going to eat twice as many potatoes if they double your salary, right? You are more likely to buy some meat for potatoes, ah-ah, what a waste! I’m kidding, of course, but in every joke, as you know, there is a grain of truth.

So, we must first determine unnecessary expenses, and then reduce them gradually. It’s not that difficult because we all know that many things we buy are actually not necessary. We buy them yielding to a momentary impulse and regret later. It is much easier to control oneself, having a clear picture of your finances before your eyes (and most importantly, frightening amount of money wasted on nonsense. Here we have only benefits as your money is safe and you do not regret impulse purchases. So we need to cut down unnecessary spending, it’s not painful and very good, in fact. After all, you want to buy that iPhone 5 and not go broke after that, right? And also you want to have vacations on the islands next summer. You can easily achieve this all if you take care of your financial health, plan and cut down unnecessary expenses. It takes only three simple steps.

Here’s my last advice. Save money. Having a certain amount is very important and useful. This will let you buy expensive things without a loan. You can take your time and look for a new job if you got fired or left yourself. You will have plenty of time to explore many options and choose the best, rather than grasp at the first option you see with a low pay and poor working conditions, because you do not have money and if you do not immediately get hired, you’ll simply have nothing to eat. This is a very sad option that should be avoided. And what if you have a chance to start a business with friends? How sad it would be to lose it just because you do not have the initial capital. Always keep a reserve of spare money and you will open up new prospects that you've never noticed before.

User testimonials

This finance software feels smooth and cosy, looks cute, it's very easy to understand and navigate around, no obscurities, requires no finance education, and above all - it feels like a joy to manage my personal finance with it, with kind of strange instant satisfaction. Simply a gem.

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Additional information

  • Personal budget - is a finance plan that allocates future personal income towards expenses, savings and debt repayment.
  • Finance plan - it allocates future income to various types of expenses, such as rent or utilities, and also reserves some income for short-term and long-term savings.


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