With rising inflation, you may have needed to adapt your budget over the past year.
Further pinched, many have lost or changed their jobs during the pandemic. Others transitioned to remote or hybrid work.
“Ultimately, the pandemic reminds us of the need to be flexible with budgeting,” said Daniel Kellogg, CFP, a financial planning income specialist with Personal Capital. “Even the most detailed, forward-looking budget is bound to be wrong, especially in a time like now.”
Why is Budgeting Important?
Online banking, budgeting software, and personal finance apps have made money management easier than ever. People can now categorize and track monthly expenses in a streamlined update to spreadsheets and the paper balance sheet. Still, good budgets are famously hard to create and even harder to stick to.
Other than a few expenses that happen on a regular basis like your car payment, housing expenses, or student loans, it can be hard to predict how much you’re likely to spend on variable expenses in a given month.
August or September mean back-to-school gear for the kids. December is gift-buying time. There are birthdays, holidays. It’s often difficult to determine how much money you will use for discretionary spending.
“It is OK to adjust your budget throughout the year or as changes happen,” Kellogg said. “Building good savings habits, both in the short run with an emergency fund and long run with retirement savings, helps make your budget more resilient and adaptable.”
While budgeting tools are definitely useful, what’s ultimately most important is that you have a sense of your overall saving and spending habits. How does your monthly income balance out against your monthly expenses?
If your spending — or take-home earnings — come from more than one source, it can be hard to keep track of your net savings.
The key to mastering your finances is having a holistic view of everything related to your money — your spending and saving habits, your income sources, your investments. Everything. In this article, we’ll show you how to create a realistic budget that you can stick to with the Personal Capital dashboard.
How to Create a Budget
Having a holistic view of your finances in one centralized location is a great first step to mastering your household budget.
With the Personal Capital dashboard, you can plug in all of your investment and bank accounts — checking, saving, credit cards, 401k, 529 accounts, loans, investment. This gives you a real sense of how your bottom line has moved by the end of the month. What do all of your monthly expenses — the mortgage, bills, student loan payments, car payments, groceries — look like against all of your earnings?
How to Budget Using Personal Capital
Your monthly income vs. monthly expenses stats are front and center on your dashboard when you log in to Personal Capital. You can flip back and forth between viewing your income and viewing expenses. For a deeper dive into each, you can get a more detailed view of your deposits, income, and transactions.
The dashboard also shows you transactions from each of your financial accounts. It allows adjust the time frame and see which expenses or income take up a given percentage of your personal budget. A bar graph also shows income-vs-spending month by month.
Read More: How I Use Personal Capital
Knowing your spending and saving habits, and understanding where your largest “hot spots” are, is a great springboard for getting a handle on your household budgeting.
This detailed view of all of your finances and transactions will also allow you to determine a realistic monthly budget number: It’s easy to list off all your fixed expenses like rent, household expenses, car payment, student loans, and the like. It’s harder to get a handle on all of the variable spending that happens every month on your different cards and from your different accounts.
On the mobile and tablet app, spending is shown in the “Budgeting” view: A circle chart depicts your transactions by type (ATM withdrawals, groceries, bills, etc.). You can see which transactions account for a given percentage of your monthly budget.
If you want more control over organizing your transactions, Personal Capital allows you to categorize them either in general groups like “Entertainment” or “Food,” or in customizable fields, like “Fido’s dog food” or “Yard Maintenance.” If you charge work expenses to your personal accounts, you can label transactions as reimbursable so they won’t count against your household budget.
If you’re looking for a place to safely park your cash, you may be interested in Personal Capital Cash. This online cash account is easy to use on the web or on mobile devices, and has competitive FDIC insurance coverage. There are also no hidden fees on the account, which is something that traditional bank accounts often bury in fine print.
With a 360-degree view of all spending and all income, you can focus on the most important part of responsible budgeting: ensuring that you are saving more than you’re spending and investing your extra money.