Ordering Accounts

Many people have requested this feature, and I’m pleased to announce that you can now change the order of your accounts in NeoBudget.  To do this, go to the Settings tab and click on Accounts.  You’ll see a “Change Order” button which pops up a window with all your accounts listed.  Just click and drag them around, then click “Save.”

Click "Change Order"

Click and drag to change the order, then click "Save"

Transfer Transactions

When you create a “transfer” transaction in NeoBudget, it actually creates two separate transactions.  One subtracts money from the first account, and the other one adds money to the second account.  Before today, when you finished creating the transfer transaction, the two transactions were completely separate.  So if you deleted one, the other one was still there.  This caused some problems if you didn’t realize what was going on and didn’t delete the second transaction as well.

I’m pleased to let you know that these transfer transactions are now linked together.  If you delete one, it will delete the other one automatically.

The most likely reason for this is that you missed entering a transaction somewhere, or mistyped a transaction amount.  The best way to fix this problem would be to go through your bank statements and match up each transaction one at a time with NeoBudget.  But who wants to do that, right?  I mean that would take forever.

The simpler way to fix this problem is to create a fake transaction in NeoBudget.  Lets say your bank statement says your balance should be $1000, but NeoBudget shows $1025.  You will need to create a transaction that will bring NeoBudget in line with your bank statement.  In this case, you would go to the Subtract tab and create a debit of $25.  This will subtract $25 from your budget.  Your balance will now be $1000 which is the same as your bank statement.  Now when you go to the Balance tab in NeoBudget, you can select all the transactions and it should balance.

A better way

“An ounce of prevention is worth a pound of cure.” – Benjamin Franklin

To prevent this from happening in the first place, be sure you’re using the Import Wizard in NeoBudget instead of manually entering transactions.  This will prevent you from mistyping any amounts.

Also, be sure to balance your budget every time you update NeoBudget.  The whole purpose of the Balance tab is to help you catch errors.  It is much easier to catch errors when you only have a handful of transactions that you’ve just entered, rather than hundreds for the past year.  So, take a few extra minutes after you update your budget and be sure to balance it!

Method #1 – Separate Accounts

The method that is most true to the envelope method of budgeting is to keep track of your credit card in a separate account tab from your checking account.  You can download your credit card statement in a format supported by NeoBudget (currently QIF, OFX, and QFX which most banks and credit card companies support).  Then import that statement into NeoBudget just like you would your checking account.  The difference is that your credit card account will always be negative.

Throughout the month, your credit card account will keep getting more and more negative.  You can create envelopes inside this credit card account to track different categories of spending.  For example if you use your credit card only for gas and groceries, just create those two envelopes.

Now at the end of the month, you can look at the negative balances and know exactly how much to transfer from the corresponding gas and groceries envelopes in your checking account.

For example, lets say you have a $250 credit payment due.  Looking at your credit card account in NeoBudget, you can see that $150 was spent on gas and $100 was spent on groceries.  When you pay your credit card, simply record this transaction in your checking account and take $150 from your gas envelope in your checking account, and $100 from groceries.

Method #2 – Same Account

Another method that has been used is to track your checking and credit both in the same account in NeoBudget.  The benefit of this is that what you see in NeoBudget already accounts for your spending on your credit card.  So if you have $200 in groceries in your checking account and you spend $150 on a credit card, your envelope will say $50 even though you haven’t yet paid your credit payment.

To do this, simply import your credit card statement directly into your checking account in NeoBudget just like you would your bank account statement.

There are two pitfalls to watch out for with this method though:

First, this makes balancing your budget very difficult.  You can’t just go down the list and compare transactions with your checking account.  You need to look at both accounts and add the ending balances.  It can get tricky and confusing if there is an error somewhere.

Second, when it comes time to pay your credit payment, you have to fudge the books a little bit.  Since you’ve already recorded all the transactions in your account in NeoBudget, when you make a credit payment you are really just transferring money from one account to another.  And since both accounts are tracked inside the same account in NeoBudget, it’s a wash.  You either don’t record the transaction at all, or you record it twice: -$250 (the payment from your checking account) and +$250 (the payment into your credit card account).

You also need to track interest.  Usually this will show up in your credit card statement as a separate line item, so it should import just fine as if it were another transaction.

Conclusion

I recommend method #1 as it’s easier to track.  But I know of many people who use method #2 successfully.  It really boils down to doing what works for you.

Do you have a method that I haven’t mentioned?  Please let me know!

This tool can even figure out your monthly budget for irregular or long-term expenses.  For example, auto insurance is often a semiannual (6-month) bill.  NeoBudget will figure out how much you need to save out of each paycheck in order to have enough to pay that bill in 6 months.  No more panic when the bill comes due!

1. Enter your paycheck information

The first thing to do is go to Settings and click on Income.  You need to create an entry for each regular paycheck that you receive.  This doesn’t need to be a fixed amount each month, but this tool assumes a fixed amount.  (Handling irregular income is covered in another post.)

Click on “New Income Source”:

Now you’ll see the Income Editor.  Enter the name of your employer, and the amount of each paycheck you receive.  You also need to specify the pay frequency.  The most common payment frequencies are shown which includes every other week (bi-weekly), twice per month (semi-monthly), and weekly.  This is used in the budget calculations later.

2.  Enter fixed expenses

Some expenses that you have are easy to figure out.  You may know that you spend $50 per week on gas, or that you want to save $25 per week for eating out.  In the example below, we have a bi-weekly paycheck (every two weeks) and we’re saving $50 out of each paycheck for eating out.

Each column represents a separate paycheck for the month.  Notice the headings “1st check,” “2nd check,” and “3rd check.”  Notice that the 3rd check is highlighted in green?  That’s because when you’re paid bi-weekly some months have three paychecks and some have two.  You don’t need to worry too much about that, because NeoBudget handles the complex math needed to average it out.  In general, you can be assured that if you use this tool, things will average out and be fine.

3. Enter complex bills and savings goals

Not all of your envelopes will have such simple savings goals.  For example, your mortgage envelope might include all the expenses related to your home.  By clicking on the “Edit” link in the “Budget” column, you’ll see a budget calculator that helps your calculate your monthly savings need to meet your goals.

In this example, I know that my monthly mortgage payment is $984, I have an annual property tax bill of $1250, and every six months I have to pay homeowner’s insurance of $312.50.  By entering all these values and specifying the frequency of each expense, NeoBudget does all the complex math to calculate your monthly budget.  This is the amount you need to save every month to ensure you have enough money to pay these expenses.

4.  Fund your monthly budget from your paychecks

Now that you know how much to save each month, you need to fund it from your paychecks.  You can click on the amount and it will automatically distribute it evenly across your envelopes.  Or, you could do it yourself if you want to save more from the first paycheck and less from later ones.

You may notice in the example below that the three paycheck allocations don’t add up to the monthly budget amount.  Remember that the 3rd paycheck column is a bit special, in that you don’t get that paycheck every month.  NeoBudget calculates the amount you need from each paycheck spread out across the whole year.  So you may get two bonus paychecks (3rd checks) in a year, not every month.

Concluding thoughts

Using this tool, now you will know that you’ll have enough money to cover your expenses.  When you record your paychecks as you’re updating your budget, simply choose the income source and paycheck number from the list, and the amount will be automatically distributed across your envelopes (see below).

The BBB called and interviewed me for this process and they verified company records to ensure that NeoBudget, and its parent company Tebros Systems LLC, are in fact trustworthy.  They have given us an A- rating.  The only thing they marked off was for the age of the company.  NeoBudget has been around for almost two years now, which is a long time for the Internet.  The BBB however, reserves their highest marks only for companies that have been around for a very long time.  We’ll get there eventually!

Be sure to check out the BBB reliability report for NeoBudget.

In the meantime, you can now rest assured that NeoBudget has been verified by an independent and highly trustworthy third party.  And we will continue doing what we have always done — providing the best budgeting solution out there while ensuring security and privacy of your information.

“Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.” - Charles Dickens

We live in a society defined by debt.  Credit is easy to obtain and easy to abuse.  It doesn’t matter how great your financial counseling or how low an interest rate you get, if you spend more money than you make then simple arithmetic will catch up with you sooner or later.

NeoBudget provides tools that help figure out your monthly expenses and allocate your income to cover those expenses.  If your expenses are higher than your income then you need to either eliminate some expenses or increase your income.  Both are valid responses, but often it’s easier to eliminate expenses.

So what are the best money saving tips?

There are many techniques one could use.  In my budget, I treat savings as if it were a bill that is paid automatically.  I make regular payments into my IRA, my 401k, and my emergency fund.  These are automatically deducted from my checking account each month.  If it were left to me, I would often find another use for my savings payment each month.  Treating savings as a regular, recurring bill removes the decision process.  It just happens.

Of course, before I figured out how much money I could save each month, I had to tally up my monthly expenses and compare that with my income.  That’s where the NeoBudget income allocation tool helps.

How about some practical ways to save money in daily life?

When it comes to the practical ways to save money (that is, reducing your expenses so it’s well below your income), there has been a lot written about this on various personal finance blogs.  Rather than come up with my own list of money saving tips, I’ll refer you to these for further reading:

• 75 Painless Money Saving Tips (Dough Roller Blog)
• 106 Money Saving Tips for a Frugal Lifestyle (Zen Habits Blog)
• Saving Money at the Gas Pump (Federal Trade Commission)
• 70 Practical Ways to Save (Family Life Credit Services)
• 20 Small Ways to Save Big (Kiplinger)