Introduction
Using budgeting software can make creating and managing a personal budget easier, faster, and more accurate as it automatically pulls financial transactions for income and expenses from all your financial accounts. Over time, the software provides you with insights into your spending habits, categorized by spending categories. You can also enable alerts if you’re close to exceeding your budget.
Flexible Budget Categories
Categories help define income and expenses in budgeting software. These categories form the basis upon which you’ll build your budget. The software you’re considering should allow you to change categories by editing names, deleting irrelevant categories, and adding your own. Avoid budgeting software that restricts you to a predefined set of income and expense categories and doesn’t allow you to make changes.
Adaptive Income and Expense Limits
Everyone has some variable expenses. For example, heating bills are usually higher in winter. An individual’s monthly income might fluctuate based on seasonal work in their industry. If you need to work with variable income, you’ll need budgeting software that doesn’t force you to input the same monthly income amount.
Simple Budget Reports
The budgeting software you choose should have some simple reports that show you how well you’re adhering to the budget on a monthly, quarterly, and annual basis. If you plan to closely monitor your spending, ensure that the software provides weekly reports or a real-time dashboard where you get quick reports on key budget categories. Basic reports show the budgeted amount, actual spending, and the difference between them. You should be able to change the timeframe for this report.
Financial Information Security
Data encryption is essential if you are linking accounts to budgeting software. The only type of software that does not do this is the software that requires you to enter transactions manually. Read the privacy or security statement of the budgeting software to learn more about how your information is accessed and whether it is protected by encryption.
Security is not an issue when setting up accounts with generic names such as “checking” or “MasterCard”. These public accounts will not have access to your account numbers or personal information, so even if your budgeting software account is compromised, there will be no way to steal your identity. The downside to this is that these public accounts are not convenient as they do not have credentials to automatically download transactions.
Password protection may not be required for some desktop budgeting software. If the software you are using does not require a password to access it, set up password protection for your computer. Your computer should ask for a password at startup and after going into sleep mode. Online budgeting software should always require a password. Do not use online financial budgeting software without a password!
Ability to Export Your Data
Most budgeting software will allow you to export your data to a CSV file that can be easily read by spreadsheet programs like Excel. This feature is particularly important if you think you may not use the software for an extended period. If you decide to switch to another budgeting program or another personal finance software, having your data in CSV, QIF, or another format will save hours of data entry.
Easy Setup
You may find it surprising, but easy setup is not as important as the other features mentioned above. Once you create the budget, you shouldn’t have to work on it except for making minor adjustments here and there. Even if the initial setup is a bit overwhelming, it likely won’t affect your long-term experience with the software.
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That can force you to make mistakes due to the confusing recognition process, which can cause problems later. The best way to determine the ease of use of budgeting software is to take advantage of any available free trials. If you find yourself unable to fully understand the program’s setup, it may be time to switch to another application.
Best Personal Finance and Budgeting Apps
Not sure where to start? Consider one of our favorite personal finance apps.
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Source: https://www.thebalancemoney.com/tips-for-choosing-budget-software-1293610
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