Many people think of a budget as an annual exercise to be endured at the beginning of each year. When finished, they congratulate themselves, wipe the sweat off their brow, and stuff it in a drawer never to be looked at again. That’s not what I mean by a budget. In order for a budget to be effective, you need to keep track of actual income and expenses throughout the year. This way you can see how your actual results compare to your original plan.
Father Celestine Strub, in The Christian Home: A Guide to Happiness in the Home (1934), wrote, “Keeping a home and a family is just as much a business as running a store; so why should it not be kept on a business basis? Many couples have had their eyes opened by keeping an itemized account of disbursements. They found that they had been extravagant without realizing it. But if keeping tab on one’s expenses teaches economy, it should be done in every Christian home; for economy, supernaturalized, is nothing but the Christian virtue of moderation.” There is a timeless wisdom to those words!
Even with the time-saving power of the computer, getting information into personal finance software programs still requires some finesse. Here are some tips that will help you get more out of the information that goes into your software.
Let’s start with your paycheck. The amount imported from your bank account will be your net pay, but it’s preferred that you record your gross pay and categorize deductions into appropriate expense categories: Social Security, Medicare, federal and state income taxes, health insurance premiums, 401(k) contributions and other amounts withheld. You’ll need to adjust your imported data for this information.
Another issue relates to how you will record credit card expenditures. Your checking account will only reflect one line for the amount of your payment, but that doesn’t capture your spending behavior. Instead, you’ll want to record and categorize each of your monthly purchases. I recommend importing your purchase transactions directly from your credit card company website.
Another challenge is to properly record purchases from “big box” stores. You may spend $500 at one of these stores, but it’s probably not all groceries. $100 may be for groceries, $100 for clothing, $100 for gardening, $100 for holidays and $100 for home improvements. Coding this all to one category doesn’t help you understand the underlying spending behavior, which is a key to succeeding with your plan. You’ll want to “split” the transaction into multiple categories, which most personal finance software allows, but it will require manual editing.
Some personal finance software programs will automatically import your data for you, but to do so requires providing your secure login information for all of your financial institutions. That’s not something I’m comfortable with yet, so I choose to manually import my data once a month. That helps avoid importing duplicate data and provides a natural time frame to compare actual results to plan. God love you!
Phil Lenahan is president of Veritas Financial Ministries and author of 7 Steps to Becoming Financially Free: A Catholic Small Group Study (OSV).
Register for “My Veritas Plan” at VeritasFinancialMinistries.com.