Your Easy Home Buying Budget
For most people creating a budget is like going to the dentist – generally good for your health but never fun. Getting started is the hardest part but the good news is that there are free online tools that help get the job done quickly and easily. For quick budgeting, I recommend Mint.com owned by software company Intuit of TurboTax fame. Mint aggregates or combines all your money-related accounts into one place which makes it way easier to see what’s going on with your money if you have several banking and investment accounts. Mint offers a mobile app but the initial setup is easier from a computer.
A budget is simply knowing how much you get paid, then subtracting your total expenses (how much you spend on stuff). Most base budgets on monthly blocks of time.
Both tools are setup similarly. You create an account and then follow steps to add all your relevant banking accounts, from checking/savings to investments. These sites use encryption and login methods like your regular banks, so the security risk is similar.
General Steps for a Quick Budget
- Create an account
- Add all the banking accounts you want to track (checking/investments)
- Let the software retrieve your information which usually takes a few minutes
- In Mint, go to the Trends menu
- Set the duration – I like to use a full year if possible
- Divide each category of the pie chart by the number of months set in step 5 to get your average monthly spend (12 if you chose a year in step 5)
- If you want to be more detailed in the categories, you can click on each part of the pie chart to get subcategories, e.g. groceries, restaurants, and fast food under Food and Dining.
- Write down the amount spent per month for each category or put it into a spreadsheet
- Find your paystubs and calculate your take home pay each month. That’s the money after deductions and taxes, aka your “net pay.”
- Subtract all expenses found in step 7 from your net pay in step 8.
Hopefully, you found the number in step 9 to be positive number, meaning you spend less than you bring home each month. If not, you have two levers to move to correct it: spend less or earn more (or both).
Understanding your finances should be a life-long learning process that a short blog post cannot begin to thoroughly cover. Below are a few of my favorite books that introduce the topic of personal finance and budgeting concepts that are worth the read.
- Dave Ramsey’s The Total Money Makeover
- Ramit Sethi’s I Will Teach You to be Rich (2nd edition)
- Vicki Robin and Joe Dominguez’s Your Money or Your Life