1. Transactions are downloaded from your bank or credit card company so you don’t have to write them down.
2. Deposits can be allocated to different spending categories.
3. Balances are automatically calculated.  You don’t have to do all the adding and subtracting yourself.
4. Software keeps tracking of budget category balances, but also maintains an online account register (as you would keep in your checkbook).
5. Run reports to see spending per category for different time periods.  This is helpful if you want to see how much you’ve spent on food monthly for the last year.
6. Set up bill pay to pay from any account.  No more writing checks!
7. Mobile view of budget and spending.  As with tracking your spending in a pocket book, mobile access allows you to view your balances on your cell phone or mobile device such as an iPhone.
8. Auto assignment rules.  To save even more time you can set up rules to automatically assign transactions for certain payees to an appropriate category.
9. Net worth calculation allows you to see at a glance your net worth considering each of your accounts and other liabilities.
10. Automatically fund envelopes or categories by setting up funding plans.  Once you set up your spending plan you simply auto-fund each spending category when your paycheck deposit is downloaded from the bank.

There are a lot of personal budget tracking software products available today.  I haven’t come across any so far I like as well as how Mvelopes Personal helps with the budgeting aspect of personal finance.  However, I’m a believer of finding software that fits your needs and preferences the best.  In fact, I’ll also take this opportunity to mention Mint which is the most popular personal finance software available.  While I don’t use Mint right today, I have heard many great things about it.  For one, it’s free.   It also has an appealing and easy to use interface.  I prefer the online envelope style to maintaining our personal budget and tracking spending, but Mint also has a budget feature that is worth reviewing if you’re considering multiple products.

No matter your choice, budget tracking software helps save time, improve accuracy and can help you learn more about your spending characteristics (good or bad) to became a better steward of your finances.

What budget tracking software do you use?  What do you think are some of the benefits of budgeting tracking software?

PErsonal cash flow management, managing what’s coming in and what’s going out, is critical to maintaining control of your spending and staying in financial balance. Some people manage it to extreme detail and others manage it up to the high level. Either way, it’s cash flow management and it’s our jobs as wise money managers to exercise it often.

Reflecting back on what I’ve seen work well; I thought I’d share some cash flow management tips that can make all the difference in the world to living within your means and making progress, month by month, towards your financial goals.

It’s a daily exercise. Performing good cash flow management and staying in financial shape requires a daily exercise routine. Not matter how you track money going out, coming in and balancing each expense with your checking account, you need to find time to do it daily. The daily exercise just takes a few minutes to review receipts and either writing the amounts in your tracking form, or inputting into your personal finance software. If you’re tracking manually you can capture your expenses at the point of sale.

You need to know where you’re at today. At any point in time, you should no how much money is in your account and be able to quickly determine how much money is left for each spending category. How do you have this information at your finger tips? If you track manually, you can keep the balances in a pocket book. If online, you can view category balances through mobile interfaces (or on via the web) available with most major applications. Either way, you can quickly determine how much money is left in the grocery category.

Determine what works best for you. There are a lot of cash flow management tools. I’ve had experience using software and paper tracking forms. Software can save time, but there is something about tracking money by writing it down that allows you intimacy with your financial situation. I once had someone tell me they felt like they were on a Weight Watchers diet when writing down expenses manually. The more they had to write down their expenses the less they wanted to spend. The point is to find what works best for you and implement the tool into your routine.

You can’t guess your way through it. Don’t try to keep track of your spending decisions or actual expenses in your head. I don’t know anyone that can successfully do this for their entire budget. Don’t try. You’ll eventually make a mistake or never really be able to determine where your money is going each month. Trying to manage in your head or via the summary balance in online banking won’t give you the measuring stick needed against a monthly spending plan.

It’s typically an eye opening experience. If you’re convinced you need to track your spending, you can save money. It’s easy to go back at the end of the month and add up all the times you went out to eat or determine how much you’ve spent on cable TV in the last year. Having this information will enlighten you to your spending habits. And some of your spending habits may frighten you once you can go back and look at them. Cash flow management provides a great opportunity to curtail careless spending and keep discretionary spending under control.

It’s a routine thing. If you’ve ever gotten into the habit of a regular exercise routine you’ll appreciate where I’m coming from with this one. Once you’re in a regular routine and miss a day or two, you feel empty. You feel like you’ve lost something that you have to gain back by getting into the gym again. When you manage your money, it’s the same feeling. Eventually, it will become natural and if you skip a day of managing your expenses or don’t plan your spending for the next month, you’ll feel like you’re getting out of financial shape.

It requires commitment. I think it’s too easy to say “I need to start tracking my money or managing spending better”, but too many times people talk about it and don’t do anything about it. You have to be about it! There is a reason why people who commit to managing their money avoid debt. As a money coach, I’ve never worked with anyone who was diligent and committed to their finances and kept spending carelessly. The two just don’t go together. If we’re committed to managing our money, we are also typically committed to spending wisely and using a spending plan.

Closing Thought – It’s not easy, but everyone can do it. As with most things in life that have big reward and pay off, it’s not easy. We can all add and subtract. That’s easy and the fundamental skill required. However, what’s not easy sometimes is going a little bit outside the norm.

I’m willing to bet the majority of the population doesn’t read 15 minutes a day. I don’t have any solid facts; it’s just a theory. If you’ll roll with my theory I think you would find reading 15 minutes a day would put you well in advance of the average in terms of information and knowledge you posses.

And so goes the same, in my opinion, with personal cash flow management. Why not do an out of the norm thing and practice just 15 minutes of managing your money each day? My theory, if you choose to believe it, will bring your finances in order, balance, and onto the path of debt free day.

What’ the best way you’ve found to manage what’s coming in and what’s going out?

To recap, you set up three separate accounts (two checking and one savings) to manage your cash flow.  One account is for fixed expenses, the second for variable expenses, and the third account is for savings.  Each week spend money out of the variable account for entertainment, groceries, etc.  Pay bills from the fixed expense account and save with the savings account with an automatic transfer when your pay check is deposited.  For more details about how it works and rules, click here.

Personally, I like to see the monthly budget broken up into more categories versus these three areas, but I completely recognize that even 8-10 categories, for example, may be more than what some people want to manage when setting up a budget.

That’s why I’m embracing this approach.  We’re all different and if this helps someone avoid using a credit card recklessly and overspending each month, I support it.

Beyond the rules and approach to the bucket budget, I’ve thought of a few ideas which I think can make this system perform even better.  If I were going to set up a bucket budget today these are the additional steps I would take to insure its success!

Bucket Budget Tips

Leverage software versus setting up an extra checking account

Use Mvelopes Personal or other personal finance software versus setting up separate checking accounts for fixed and variable spending.  With Mvelopes in particular you can set up two separate envelopes (variable and fixed) and automatically allocate your paycheck to each envelope when it’s deposited into your account and downloaded to Mvelopes.

Keep an eye on a few variable spending areas

Mange a few common problematic areas in the variable expense envelope that can lead to overspending.  Set up sub envelopes under your variable expense envelope for three categories of spending:  groceries, entertainment and clothes.  All other variable spending can stay in the parent variable spending envelope.  Separating spending in these three areas will help you keep a closer eye on spending and avoid depleting the variable envelope too quickly.

Use a high yield online savings account

Set up a savings account, but use an online bank account such as ING Direct Orange savings account.  I’ve recently set up my savings with the Orange savings account and have found it provides an extra layer, in a good way, between me and my money.  It takes longer to transfer it into my checking account than it would with a savings account from the same financial institution as my checking account.  This helps me think twice about using my savings for things it shouldn’t be used for.

How long will it take you to take these three additional steps? 

One of the concerns for some people when it comes to budgeting is the amount of time it takes to set up a budget and then maintain it.  If this is you, check out the below estimates which might change your thinking.

• Set up Mvelopes:  15 – 20 minutes to sign up, set up your envelopes and enter your financial institutions for automatic download of transactions.
• Set up ING Savings Account: 15 – 20 minutes set up time and 2 – 3 days for account activation.

How long will it take you to maintain your spending each day with the Bucket Budget approach and these tips?

For all the envelopes mentioned, you might spend 5 minutes per day assigning downloaded transactions to the appropriate envelope and reviewing the balances.  Tip:  assigning transactions in Mvelopes is easy.  After they automatically download from your financial institution you can drag and drop them to the appropriate envelope.  I’m sure other programs do the same.

• Total estimated time to invest in cash flow management each week:  25 minutes (5 minutes per day)!
• Total cost:  Mvelopes has a free 14 day trial and monthly charges for as low as $7.90 per month (2 year plan)
• ING Direct Orange Savings currently pays you 1.3% interest.  Learn more by clicking here.

What are your thoughts on the bucket budget approach and using these tips to further the effectiveness of it?