Budgeting Software – Is It Really Necessary?
This is probably one of the most debated questions on the topic of a budget. If you want proof of that, do a search on the internet for budgeting software, and the millions of results will confuse you even more.
Another interesting search is for reviews of budgeting software. The millions of results here are mostly from affiliates of software vendors hoping to get a commission when you buy one of the packages.
Be careful when evaluating those results however. An affiliate isn’t going to post a bad review of the product he’s promoting. Some over-use the word FREE to make a sale, and we’ve found that to be a big negative.
The question you need to ask yourself is, will this software program solve my problem? Does it give me what I need? If not, then it’s not right for you, even if it is free.
Over the years, our firm has reviewed quite a few budgeting software packages. Some very simple and some really complex. What we have discovered is that user experience and trust of the product is paramount.
Product support comes next, and if they also give free training, it’s hard to go wrong. Check out their support FAQ’s and problem resolution to user questions as well. We normally don’t mention any product names, but one program called “You Need A Budget”, YNAB, pretty much tops the charts for us.
Any good budgeting software package must be able to track your income and expenses, at the very least. You need to see exactly where your hard-earned money is going, otherwise you’re just spinning your wheels.
Next in line of importance for us is to actually include a line item in your budget to reduce and eliminate debt, especially those volatile credit cards that just seem to never go down. This program, YNAB, not only does that, but it emphasizes debt elimination.
Before we go any further, let me say that we are NOT an affiliate of this program, nor do we receive any free software or other promotional items. We are totally independent.
Benefits of Budgeting Software
I can hear some of you saying, “why should I buy a budget program when I can use Excel?” If you can program that spreadsheet to give you exactly what you want and need, then it’s great and the one for you.
What it won’t give you though, is certain reports and reminders that many of us need. You also wouldn’t get various recommendations that are in YNAB.
As an example, most of us want to be able to see how much we’ve spent on dining out for the past several months. Another easy report would be how much you’ve given to charities or your church. When tax time rolls around, printing a report showing the total for each charity would come in handy.
This is one of the very few budgeting software programs that we recommend to our clients. This intuitive program has been around for many years and was developed by a CPA, experienced in budgeting concepts.
Because he understood just what was needed for a budget to work efficiently, the program sales skyrocketed, and has been a highly acclaimed software package.
Anyone familiar with the concept of budgeting knows that the amount of income is normally estimated for the current month, and then you list your various expenses. YNAB uses a rather unique methodology called zero sum budgeting.
What this means is that every dollar has a job and purpose. Instead of guessing what your current months income will be, it uses the previous month’s actual income numbers, and that is used to pay the current month’s bills.
We don’t know of any other budgeting software program that uses this concept, but it works very well. The idea is to make sure that every dollar, including debt retirement and savings, has a specific purpose.
It doesn’t stop there either. There is a method to setup an emergency fund to handle those unforeseen items that will come around. They include medical, auto, and many more that will come.
The program has many types of categories that you can choose from and basically uses the envelope method of budgeting. We recommend, as do many financial experts, that everyone create a fund to cover at least three to six months of your expenses.
If you lose your job, or have some serious medical issue, you’ll be glad that fund is there. This program really is easy to use, and will help you to create a budget that you can follow.
Don’t take our word for it though. YNAB will let you “kick the tires” for about a month, free of charge. Take it for a test drive and see for yourself just what this budgeting software program can do for you.