It’s a common problem: You vow to spend less each month than what you earn. Or maybe you plan to stash at least $300 at the end of the month in a savings account that you can tap for unexpected financial emergencies.
But then the end of the month hits, and you’ve spent $300 more in groceries, $50 more in entertainment and $40 more in gas than you’d planned. You no longer have any money for savings. In fact, you don’t even have enough to pay off your credit card balance in full.
The truth is, creating a budget and then actually sticking to it isn’t easy. We can all use help at times.
Fortunately, such help exists in the form of money management software. This software, such as Mint.com, YNAB and LearnVest, helps consumers create budgets, track their spending and set financial goals. Some programs even send consumers alerts when they're in danger of spending too much on clothes shopping, dining out or gas for the month.
Consumers and financial advisors alike say that these money management tools can help users not only set realistic financial goals but also stick with them.
Magda Walczak, chief customer officer for Chicago-based software company Search Party, said she began using Mint.com, one of the most popular of the online money management programs, about eight years ago when her credit card information was stolen during a trip to Africa. Walczak didn't find out about the theft until 10 days later, when her statement came and it listed several purchases that she hadn't made.
"No one called or e-mailed me before that, so I decided that I needed something that would help me understand where I stood financially on a more real-time basis," Walczak said. "Ever since then, every account I have is hooked up to Mint."
Walczak today has several alerts set up with Mint. The program will send her a message when she's close to breaking her monthly budget, for instance, on clothes shopping.
"You set your goals on what you are saving for," Walczak said. "The program helps guide you. It pushes you on the right path to those good habits. After that, it's up to you."
Financial advisors agree that budgeting and money management software can provide a boost to consumers hoping to get their spending under control and increase the money they save each month.
But for this software to do its job, users have to actually adjust their monthly spending. No software can force consumers to do this.
"I don't think there's a better tool out there right now," said DeDe Jones, managing director and registered investment advisor with Lakewood, Colorado-based Innovative Financial. "But like any tool, you can use a hammer wrong, too, and have bad results. If you ignore what the software is telling you, you won't get the results you want. But if you use these tools properly, it can make a significant impact."
There are plenty of programs that can he popular programs to help you decide. But remember what financial pros say: The program you choose is not as important as whether you actually pay attention to what these services are telling you about your finances each month.
“I work with many types of clients, some who use automated money management tools, some who have their own spreadsheets and others who use nothing,” said Diane Nissen, founder and owner of the Alexandrite Group in Rochelle Park, New Jersey. “In all cases, the use of something to keep track of their spending is vital to understanding what they need to change.”
Mint.com: This Web-based tool is free and easy to use. Just sign up, and you can quickly connect your important accounts – your savings account, checking account, mortgage loan, auto loan or whatever you want – to your new Mint.com account. Once you do this, your financial information is updated automatically every time you make a payment, deposit money or make a withdrawal.
Mint shines when it comes to budgeting. The program allows you to create your own financial goals. Mint will then track how well you’re moving toward them. Say you want to limit your spending on dining out to just $100 a month. If you get too close to this limit, Mint will send you a warning.
It’s easy, too, to create a budget with as many categories as you want. Mint will track how much money you’ve spent in each category so that you can easily see how well you’re meeting your budgetary goals for the month.
LearnVest: The online money management program LearnVest isn’t as well-known as Mint, but it’s still plenty useful. It even offers a few options that its more popular competitor doesn’t, though they’ll cost you.
The basic version of LearnVest is free. And like Mint, you can use the program to track your monthly expenses and income. Unlike Mint, though, LearnVest aims to be more of an educational tool. All the budgeting and tracking features that it offers come with financial strategies and information designed to boost the financial literacy of its users.
You can even sign up to work with a financial advisor through LearnVest. This service, though, isn’t free. You’ll have to pay a $299 charge to first connect with a financial advisor. You’ll then have to pay a fee of $19 a month to continue this service.
YNAB: YNAB, which stands for You Need a Budget, is a good budgeting tool for those who don’t feel comfortable with connecting their bank and financial accounts to an online service such as Mint. YNAB is an offline app. You’ll have to manually enter your account information and input any purchases or deposits in the same way.
But if you’re disciplined enough to do this – and can track your funds without the benefit of the automatic updates provided by other budgeting software – then YNAB is a great alternative. That’s because the program’s budgeting software is powerful and can help you track as many categories of expenses and revenues as you can dream up.
The program isn’t free. You’ll have to pay a one-time fee of $60 for it. In addition to its budgeting features, YNAB features video tutorials and informative articles that can give users a crash course in personal finance.
BudgetPulse: There are plenty of free competitors to Mint today. BudgetPulse is one of them. This program is a no-frills budgeting tool that works just fine if you find that you aren’t using most of the extras that programs like Mint offer.
BudgetPulse is actually a good choice for consumers who only want to track their spending or savings in certain categories. When you set up BudgetPulse, you might choose, for instance, to track only what you spend on entertainment or dinners out in a given month. Maybe you’ll only track how much you spend in transportation costs or grocery shopping. BudgetPulse lets you do this easily and quickly.
You can also use BudgetPulse to set up your personal savings goals, much like you can with Mint. Once you do this, you can access graphs that will tell you exactly how close you are to meeting your goals.
Doxo: Free service Doxo is a little different from the rest of the budgeting programs out there. That’s because it’s better described as an online filing cabinet that lets you automatically pay your bills for everything from your mortgage and auto loans to your credit cards and utilities.
The goal is to store your most important household documents in Doxo’s online filing cabinets so that you always have easy access to your most important money information. You can also use Doxo to track recent payments and account balances. You can use the service to track whether you’re behind in any payments. And using the mobile app means that you can track your payments no matter where you are.
You can’t use Doxo to track how much you’ve spent on groceries for the month, but that doesn’t mean that it’s not useful. In fact, using Doxo in addition to a free budgeting tool such as Mint or LearnVest can give you even more control over your personal finances.
