Creating A Budget
Once you have setup your Categories and
Scheduled Bills and Deposits it is time to setup a budget. Don’t
worry if you haven’t done this before, it’s relatively simple.
Budgeting is a great financial tool. It takes discipline to stick
with it. If you fall off the wagon for a month or two get back on as
soon as you can. From the PLANNING menu at the top of the screen
choose BUDGET. If you are not already on the SETUP Tab please choose
it.
Quicken allows you to auto create a budget. I
find for the new user this is not an effective means. The budget
amounts are calculated over the period of a year and if you do not
have data in it will return zero amounts and miss categories where
you are spending. I suggest the manual creation method. You can
estimate the category amounts you believe you spend but plan to redo
the budget after a month or two of using Quicken. Click MANUAL then
CREATE BUDGET. Enter a name and description then click OK
You should now be at the INCOME TAB. At the
bottom left of the window you will see the CHOOSE CATEAGORIES.
Clicking this will take you to the Category List. Choose the Income
Categories that apply to you. These should be setup from the
previous steps outlined in the section Setting Up Categories &
Groups. Choose the category and a green tick mark should appear.
After selecting all that apply click OK. With AVERAGE AMOUNT
selected enter the amount of your income and the period then select
APPLY. This updates your budget amount. Repeat this if you have more
than one category for Income. Remember this section is for inflows
of money. If transferring funds between accounts this is the amount
you are setting up to spend.
After entering all of your income data select
the EXPENSES TAB. You repeat the same steps for adding categories as
you did on the INCOME TAB.
When preparing to setup your budget have an
idea of the time period for each category. For example, you may
budget auto expenses quarterly or groceries weekly. Quicken allows
the freedom to enter information in daily, weekly, bi-weekly, twice
a month, monthly, every two months, quarterly, bi-annually, and
annually. For each category choose the period that works the best.
While planning your budget you can see if your
income is going to fall short of your expenses. Remember from
Setting Up Categories & Groups how we selected the Mandatory or
Discretionary group for our categories? The best way I have found to
setup a budget is to tick of the check box on the lower left called
SHOW CATEGORY GROUPS. I make sure all of my Mandatory Expenses are
fully covered. I then fill in the amounts of my Discretionary
Expenses. If I need to adjust amounts to ensure my Income is lower
than my Expenses it comes out of my Discretionary Expenses. If this
still doesn’t reduce Expenses enough, consider making some major
life changes, such as, moving to lower cost housing, giving up
novelty items such as cable TV or cell phones, and/or selling a
vehicle.In short your
expenses have to be less than your income.
The next
tab is the SAVINGS TAB. This allows you to track and plan saving
money. If you are comfortable enough with the budgeting process go
ahead and set this up. It is not necessary at this point and can be
revisited after you become more comfortable with the operation of
quicken.
Finally we get to the SUMMARY TAB. This is just
an overview of how your planning has worked. Congratulations if you
show that your budget is working with a positive difference at the
bottom. If not go back and rework your expenses until you show a
positive amount. It shows how much your savings in a year should be
by following your budget.
After running your budget for a year you should
run a Budget Report. Managing to remain under budget for the period
of a year will provide you with a cash surplus.
Some final notes about budgeting. It is always
a good idea to budget 10% higher than the expected amount. This
provides cushion if an unforeseen expense comes into play. At the
end of the year you can move this extra 10% into savings, use it for
a big purchase or vacation. Always plan to err on the side of
caution.
BACK
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Related Articles
Categories & Groups
Scheduled Bills & Deposits
Creating a Budget
Setting Up Online Services
Reports
Quicken Home Inventory
Backing Up Your Data
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Additional Article Information
This Article was written by
Christopher Skjonsby
This article was posted
October 25th 2008.
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Disclaimer
Please note the articles contained herein are examples for one
method for managing your financial situation. If you are in serious
financial trouble theCitySage.com recommends speaking with a debt
counsellor before proceeding.
The purpose of the articles under this category are to help you
the reader become more aware of how and where you are spending your
finances focus on the mandatory expenses and get control of your
discretionary spending. Follow at your own risk.