Budgeting

[Lynne Edwards]

I’ve been retained to help a family get control of their finances. The first thing on the agenda (I believe) is to develop a household budget — something I’ve never done for a client. I’ve explored a number of budgeting apps online and read pretty extensively on the subject, but am hoping my colleagues with experience in this endeavor will offer advice.

This family has been through a lot. In March, the husband/father returned home after a year (!) in alcohol rehab (financed by his parents). Then, in April, the wife/mother was diagnosed with breast cancer; she’s currently in treatment.

I’d be grateful to know of any budgeting tools that you find particularly useful (or not) and any other suggestions you may have for helping this family.

Thanks in advance,
Roxanne

[Anonymous]

I’m sure in your research you found there are a lot of budgeting apps available and different ways to budgeting. YNAB (You Need A Budget) is very popular and you either love it or not. It is a learning curve but those that get it, love it and live by it. It is a concept that is difficult for me, but I understand it. The other popular one is Mint, but that gives you more of a history where everything went and how you spent/spending your money.

My suggestion is to find out how detailed or not they want to be. Do they want to work like a Dave Ramsey…cash-only, envelope system? Are they the type of people to know exactly where each dollar went and give each dollar a name? Or do they not like nickel and diming? If the latter, I would suggest something simple as separating your money into 3 categories…Fixed & Recurring Expenses; Day-to-Day Expenses; Expected/Unexpected Expenses and track on a spreadsheet. I also have a spreadsheet that I use with my clients that helps them budget out. If you would like to connect and discuss this more, I’ll be more than happy to talk to you about it.

[Anonymous]

Another app that I just learned about is http://www.fearlessfinance.com. It aggregates data from spending accounts in just a few categories of discretionary spending. It was developed by DC-based financial advisor Lori Atwood. She has a very no-nonsense, no-excuses approach to achieving financial wellness.

[Anonymous]

I don’t use an app. I go through there expenses and their income and come up with an excel spreadsheet. It Quickly becomes apparent where they can cut. You need to organize the expenses in groups of:
mandatory- cost doesn’t change ie: mortgage
Mandatory- variable costs- groceries and medicine
Desirable- cable tv and vacations

You will come up with other categories- I wouldn’t get them to small to start with. For example you could have a category of entertainment and put a lot of things in there. Utilities can get put together.

Once you have a handle on things you can look at where you can eliminate or tighten up.
If you use Quicken they have standard categories that can help.
It can be very useful because you can download the last years expenses categorize them into standard categories and run a report. It will tell the story.
I generally do it on a notepad until they are committed to cutting costs.

They do not all follow through.

[Karen Ethridge]

Thanks for the question Roxanne. Really appreciate the responses and plan to try out the app Leah mentioned fearlessfinance.com which looks a lot like Mint but less detailed (which may work better for some). I sometimes use the client’s bank information on their website, like US bank offers this where you can see the spending over a certain period of time. This is a useful budgeting tool when there is one financial institution and maybe another one that is used for savings. I’ve also used https://www.personalcapital.com which is a bit robust and is a free budgeting tool that includes a “free advisor” consultation which you don’t have to use(but that’s how they make their money). If there are investments your clients want to track, this is a good one. Good luck!

[Anonymous]

Hi Roxanne,

For budgeting I highly recommend EveryDollar.com, Ramsey Solutions budgeting app. It would probably also help your clients to take Ramsey’s Financial Peace University to teach them how money works and how to manage it.

As someone said, Mint (and Quicken, which I use) are great for keeping track of spending, but offer a more retrospective view as far as the budget goes.

I used to use YNAB, but I found the “upgrade” they did a few years ago needlessly confusing.

[Author]

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