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Should You Use an Online Budget Tool?

Should You Use an Online Budget Tool?

There are many online budgeting tools that allow you to store all of your financial information on a website.  The most popular of these tools by far is Mint.com.  The question I ask is, are these online budget tools better than creating a budget template yourself and making your budget at home?

What is an Online Budget Tool?

By online budget tool, we mean a money management system like Quicken.com or Mint.com, whereby you use their web interface to download and store financial transactions.  You are able to modify the data but ultimately the information is being stored in the website’s databases.  Once your transactions are loaded into the budget tool, the website automatically generates budget reports and financial planning tools to assist you in paying your debts and managing your money.

Who Has Control of Your Financial Information?

Should You Budget Online or on a Spreadsheet?The first thing to think about is control of your personal information.  When you use an online marketing tool the website has control of all of your data.  That means that if the service goes out of business, you will lose your information.  If the service is free and they begin to charge, you will have to start paying for the service.  If the service raises their prices dramatically, you will have to pay more to use the service.   With that said, you can download the data from these online tools and switch providers, but then your stuck trying to load data to another system that doesn’t match, as well as trying to learn a whole new interface – one that you’re not used to.  In my opinion, its best to keep control of your own data.

How Complicated is the Budget Tool?

I’ve found that many online budget tools are not very intuitive.  For example, trying to do a simple step like add a new expense category or recategorize something could turn out to be difficult to do.  That’s because many of these online budgets do not think the same as you.  They likely started as a simple program years ago and have since been patched and patched to add more functionality.  What often happens is that the tool becomes harder and harder to use.  The more accounts you have, the more difficult and complicated the tool will become.  With that said, if you’re good at adapting to new software then it shouldn’t be a problem for you.

Another way that these budgets are complicated is because they try to do too much.  For example, I have used Quicken in the past and loaded all of my financial accounts and transactions into the software.  Each time an auto update was done, none of my balances would match and I’d need to spend hours trying to figure out why.  That’s because these programs get different transaction data from different banks, credit cards and brokerage accounts, and don’t always know how to classify them properly.  Also, these programs are known to be very buggy.  After all, an automated program that does ALL of your budgeting and is free is a little hard to believe, right?

How Long Does It Take You To Update Your Budget?

Another big factor to consider when deciding to use an online budget tool is to consider how long it will take you to update your transactions each month.  Depending on how complicated your finances and accounts are, your online software may be able to download, merge and update all of your accounts seemlessly.  In other cases, you may have to go through all of the downloaded data and classify each expense.  Consider that most of the online tools try to download the following: checking accounts, savings accounts, mortgage accounts, credit cards, brokerage account balances, and even stock transactions.  If you commit to using these online services, then you’ll have to commit to keeping all of these transactions up to date also.

Depending on the service, these online tools may be much faster than updating all of your budget information each month using your own downloads and spreadsheets.  Personally, I have a spreadsheet for my checking account that lists each transaction along with a description, category and amount, so when it comes to summarizing the month’s transactions, I can just sort the spreadsheet.  Instead of taking all of my expenses into account, I choose which ones affect my budget and only keep track of those.

Do You Like Graphs and Charts to Show Your Budget?

If you like to see lots of charts and graphs, then an online budget tool might be the right choice for you.  That’s because these programs are great at being able to easily gather and chart the information that you’ve entered into their tool.  For example, you can look at a chart of your total budget by month.  Then you could switch to a pie chart of your total monthly expense by category, which could even further narrow down where your spending is out of control.  Then, you could look at a monthly bar chart of your top expense category to see if you are trending in the right direction or not.  Needless to say, that’s what these online budget tools are best at.  If you were able to download, enter and organize all of your data how they like it, then they can give you some pretty good graphical interface into your finances and spending habits.

The Takeaway

It comes down to personal preference as to whether to build your own budget template or use an online tool to do your budgeting.  Personally, I like to have all of my finances in a spreadsheet so that I can customize it and control it over the years.  That way, when it comes time to do my taxes or find previous years expenses, I know exactly where to find the information, and I don’t have to worry about software updates or sites going out of business or merging with other companies and having to deal with new ways of doing things.

That’s my two cents, let me know if you have any thoughts on online budgeting.

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