To start off, if you haven’t viewed Emily’s screencast on using Quicken with your zero-based budget, you’ll want to do that first.

You can receive a copy of the Working Budget excel file shown in the screencasts below by subscribing to my newsletter on the right.

Step 1 – Set up your accounts

If you choose to use Quicken to keep track of your money, I’m going to assume you already use Quicken and know how to set up your accounts. If you don’t already use Quicken, I would recommend using You Need A Budget software. You can read my You Need A Budget Review or watch my screencast You Need A Budget Overview.

Step 1 is to simply set up your accounts in Quicken so do that first.

Step 2 – Allocate existing account balances

Allocate any existing account balances. There are three general ways to make your allocations.

1. Funds are reserved for a specific purpose. If you already have a specific use in mind for the funds in your accounts, allocate them accordingly. For example, you may have some money reserved for a large purchase or vacation.
2. Use funds for this month’s budget. If you’re starting your budget mid-month or are tight financially, you may need to use some or all of the money in your account for this month’s budget. If that’s the case start allocating the money according to the priorities you established in your Master Budget.
3. Use the funds for next month’s budget. If funds are neither reserved for a specific purpose nor are needed for this month’s budget, put them in a “buffer” category and start building up a month’s worth of expenses so you don’t have to live from paycheck to paycheck. It will also will act as an insurance policy to ensure you don’t overdraw on your account

You’ll want to allocate funds in your Working Budget and within Quicken. Watch the screencasts below for more details.

Step 3 – Budget your income

As you receive your paychecks, enter them and allocate the total amount into your budget categories according to the priorities you established using your Master Budget. Allocate your income in both your Working Budget excel document and in Quicken. See the screencasts below.

Step 4 – Print your budget.

If you have a buffer of one full month’s worth of expenses and can budget the whole month at once, print the Working Budget once all the funds are allocated. If you are allocating paycheck to paycheck, print out your Working Budget each time a new paycheck is received and allocated. Put the print outs into your financial binder.

Step 5 – Entering expenses.

You don’t need to enter expenses into your Working Budget until the end of the month when you’re ready to reconcile your budget. You can, if needed, enter transactions throughout the month into Quicken. You should do this if you are very tight and need to keep tabs on your accounts to ensure you don’t overdraw.

Reconciling

In a couple of weeks I’ll detail how to reconcile your budget at the end of the month. Until then you don’t need to worry too much about entering transactions unless you are very tight financially and risk overdrawing your account.

Conclusion

That’s it you are now up and running on your first working budget using Quicken and Excel. If you want a copy of the Working Budget spreadsheet, just subscribe to the newsletter and you’ll be automatically emailed a link to it.

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More From sjpeer

• How to Create a Master Budget
• How To Create Your First Working Budget With YNAB
• How To Create Your First Working Budget With Excel Or Pen And Paper

For years my wife and I had to make due with trying to make Quicken work using a zero-based budget. While Quicken simply isn’t made for zero-based budgeting, we did find a cool hack that lets us keep track of our money in a way very similar to a zero-based budget. It’s kind of like zero-based accounting.

Using this method combined with a zero-based budget spreadsheet, we were able to get the control we needed. In the screencast below, my wife Emily takes you through an overview of this hack and how it works.

For those ready to create their working budget, you need to watch this video first before you read about how to create your first working budget using Quicken and Excel

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• How To Create Your First Working Budget With Excel Or Pen And Paper
• The New GFD Is Up!!!
• 10 Secrets to Budgeting Success (Week 3)

The tool I recommend for creating and managing a budget is using You Need A Budget (YNAB) budgeting software. You can see my YNAB review for the various reasons I recommend YNAB.

In the videos below I outline how to create your first budget with YNAB and explain the basics of how YNAB works. I’ve divided the videos into 9 parts and they are meant to be viewed sequentially. Follow along and before you know it you’ll be up and running.

If you don’t have YNAB and want to give it a try, you can download a free, fully-function trial version here.

Part 1 – Overview

To start out, here’s a quick overview of why I think YNAB is so great.

Part 2 – Setting up your accounts

The first step to getting started with YNAB is to set up your financial accounts.

Part 3 – Managing categories

The next video shows you how to manage categories in YNAB. You can add, delete, edit, and reorganize your categories for your personal needs.

Part 4 – Allocating initial balances and how the buffer works

After you first set up your accounts you’ll want to allocate the existing balances in those accounts. You may have those funds reserved for something already or you may want to use them for this month’s budget. You could also use them to start creating your buffer of one month’s worth of expenses.

Part 5 – Budgeting your income

Up to this point you’ve set up your accounts and allocated any existing balances. Now you receive your first paycheck. This video shows what to do.

Part 6 – Printing your budget for your financial binder

Every time you receive a paycheck and allocate funds, you should print out your budget, mark any notes on the printed copy, and store it in your financial binder. If you’re a month ahead and can allocate your full month all at once, you’ll only need to print one budget. However, if you’re still living paycheck to paycheck, you’ll want to print out a copy whenever you receive a paycheck.

Part 7 – Entering additional paychecks

This video explains different options for entering paychecks. The three scenarios are:

1. You need to use the paycheck for this month’s budget
2. This month’s budget is already funded and you want to usethe paycheck for next month
3. You need some of the money this month and some of it next month (split transaction)

Part 8 – How YNAB handles expenses

At this point your budget should be complete (at least up to your last paycheck). In the next video I show you how YNAB handles expenses and how they’ll appear in your budget. I won’t be going through the entire process of reconciling your budget yet. We’ll cover that in a few weeks when it’s actually time to reconcile.

Part 9 – How to re-allocate funds between categories

What happens if you want to transfer funds between categories that were funded in previous months? This short video shows you how to move funds from a previously-funded category to another category.

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• How to Create a Master Budget
• How To Create Your First Working Budget With Quicken And Excel
• How To Create Your First Working Budget With Excel Or Pen And Paper

There is no lack of tools out there to help you create and manage your budget. The problem is, most programs out there try to be too many things to too many people. They end up experiencing feature-bloat. There are so many features that the programs get bogged down and difficult to use. This doesn’t serve to clarify the budgeting process, but rather makes it more confusing. In addition, the budgeting feature in many programs is an afterthought rather than the main focus.

Well I’ve finally found a program that does one thing and one thing extremely well: budgeting. You Need A Budget (YNAB) is a budgeting program that makes it easy to create and manage your budget. Not only is it dead simple to use, but it helps you be accountable for any overspending so that it’s easy to see where you’re overspending and what to do to remedy the problem. It’s the program that I personally use to manage my household budget and I haven’t missed the days of trying to make Quicken work the way I want.

Simply put, if I were to develop a budgeting software program, YNAB would be it.

The Quicken Problem

Feature Bloat

For years I used Quicken to manage my personal finances and budget. While Quicken certainly has an impressive feature set, I found that this actually hindered me managing my personal finances. The huge feature set actually made it more confusing to accomplish my simple goal: to manage my budget. I found that I didn’t need the vast majority of features and was often confused with how to meet certain simple goals.

Budgeting features that don’t work

In addition to feature-bloat, Quicken has a budgeting feature that didn’t help me keep my budget. It didn’t keep me accountable if I overspent in a category. For example, if you overspend in a budget category, quicken will show you that you spent more than was budgeted, but it doesn’t force you to decide where that overspent money came from. While it’s useful to know if you’ve overspent, you have to DO something about it if you want your budget to be successful. Quicken doesn’t make that process easy.

On the other side of the coin, if you underspend in a category Quicken does nothing to help ensure that money is put to good use and used how you want. Nor does it track any accumulated balances for various savings categories. In the end, the budgeting feature in Quicken and other similar programs is really quite dangerous because using it makes you feel like your successfully doing a budget, but there’s no follow-through and so your budget doesn’t work in the end.

YNAB does one thing and does it well – Budgeting!

YNAB is unlike any other financial software in that it chooses to eliminate features that are unecessary to the task at hand. It is a mean green budgeting machine. It allows you to create a working budget simply and elegantly. If you’re looking to track investments, you’ve come to the wrong place. If you want to create fancy and complex automated sequences you’ll want to look elsewhere. But if you want to create a budget that is easy to track and gives you total control over your money, you’ve come to the right place.

To show you how simple and focused YNAB is, it only has three main sections. This makes it very easy to use. You can’t get lost in tons of features most of which you’ll never use anyway. Instead, there are just a few places to look and a few things to do.

The three YNAB sections are:

• Accounts

  In this section you can see your various accounts and can enter in transactions for those accounts. This works much like many financial programs with one exception: when you budget income you choose whether you want to make the money available for budgeting this month, next month, or not at all. If you make it available for budgeting this month it will automatically show in the budget section as money available to be allocated to your budget categories for the month. If you make it available for budgeting next month it will appear in your “buffer” for next month and be available for budgeting next month. If you choose not to have it show in the budget it will remain as a register entry only. You may want to use the third option for things like investment funds that don’t go into the monthly family budget.

• Budget
  
  This section is where the magic happens. This is where you can see the money available for budgeting and can quickly allocate the money to categories. YNAB starts with a solid set of default categories to get you started. The categories are easy to add, delete, edit, and re-order so you can customize your budget for you.

  The budget screen shows your starting buffer, any additional income available for budgeting, and the balance remaining that hasn’t yet been budgeted. It shows category balances that carry over from month to month and clearly identifies in red font which categories have been over spent. At the bottom it shows any overages that will be subtracted from next month’s budget.

• Reports

  YNAB doesn’t have a lot of reports but gives you the basics. It shows your income and expenses and can quickly identify where your problem categories are. It also shows you what percentage of your budget each category occupies making it easy to see cateogries out of whack with general budgeting norms (although what is normal anyway?).

  The reports also show a version of your net worth. While this is useful for quickly seeing the value of your accounts, it won’t be 100% accurate since it doesn’t include any property or possessions. However it would be handy in creating or updating your Net Worth Statement.

Built On Sound Principles

YNAB is built to take advantage of sound financial principles. Three of those principles are the exact same as those outlined in my podcast 10 Secrets To Budgeting Success. The principles are:

1. Rule One: Stop Live Paycheck To Paycheck – This is the principle of getting a month ahead in your budget. If you try to live off of this month’s pay you are going to be stressed wondering if enough money is in the account at the time the bills are due. That’s no way to live. Instead, give yourself a buffer by accumulating one month’s worth of expenses in your account. By doing so you’ll never have to worry about having the money at the right time. You’ll be able to budget a full month at a time rather than paycheck to paycheck. Your buffer also acts as a protection against mistakes or emergencies. It’s easier to recover from overspending by paying your buffer back than paying your bank overdraft fees or going into debt.

   YNAB makes follow this rule easy with their unique buffer system. If you have extra money after assigning your paycheck to the categories it will carry that money over to next month’s budget as a buffer. Once the buffer reach one month’s worth of expenses you’re no longer living paycheck to paycheck.

2. Rule Two: Give Every Dollar A Job – This is the principle of using a zero based budget and assigning every dollar of income to a job or category. YNAB makes this easy by showing how much income is available to budget. As you assign money to categories you see the amount available to budget decrease until it reaches $0.

   This rule also covers the principle of being accountable for overspending. YNAB makes it clear when you’ve overspent and instead of just informing you, it actually requires you to compensate for overspending by budgeting that much less next month. See below for other ways YNAB handles overages.

3. Rule Three: Save For A Rainy Day – This rule is the same as the secret of planning for periodic expenses. Instead of being suprised by periodic expenses such as a car registration, you can easily budget ahead of time to ensure you have enough money when the time comes. YNAB makes it easy to do this by allowing you to assign money to categories. The assigned money is carried forward from month to month until you spend it. For example, if you budget $10 a month for your car registration you will see a $10 balance in that category. Next month when you budget $10 you’ll see a $20 balance and so on until that category is fully funded.

   I can remember the first time we accumulated funds for car maintenance and repairs. When the car broke down we just looked in that category and saw the money there. Instead of a panic attack and huge stress, we just got the car repaired and payed for it in full. No stress, no anxiety, no drama. I never thought a broken-down car could feel so good.

4. Rule Four: Roll With The Punches – YNAB makes it easy to roll your budget from one month to the next. Instead of each month’s budget acting like an island, as they do in programs like Quicken, YNAB effortlessly connects one month to the next. If you overspend, instead of feeling like giving up on this budgeting stuff, you’ll be able to quickly and easily identify the problem and make adjustments. You’ll feel empowered instead of defeated.

A Virtual Envelope System

YNAB categories act like virtual money envelopes. You put the amount of money you want to spend in the envelope and when you spend it the money comes out of the envelope. If you’re saving for a larger goal or purchase you can put a little money in your envelope (category) every month until you have enough.

This system eliminates the need to have multiple bank accounts for different savings purposes. You can easily have all the money in one account and still track what it’s for.

Take Control Of Your Budget with YNAB

The reason YNAB is so effective is that it forces you to account for money you overspend and underspend. If you overspend in a category, you not only see the amount overspent in bright red lettering, but YNAB automatically carries the overage into next month’s budget showing you that you need to budget less next month to make up for it.

There are actually three options if you’ve overspent in a category. Let me detail them here:

1. Carry the overage to next month. This is how YNAB reacts by default. It takes the amount you were over in your budget across all categories and applies the overage to your next month’s budget. So if you were over by $100, you’ll need to budget $100 less next month to make up for it.
2. Carry the overage to the same category next month. If you want to apply overages specifically to the same category you were over in, it’s as easy as a mouse click to do so. For example, if you overspent $50 in the grocery category, you can tell YNAB to start that category at $-50 next month requiring you to control your spending a bit more next month to make up the difference.
3. Re-allocate funds. If you overspend in one category but underspent in another, YNAB makes it dead simple to re-allocate the funds from one category to another. Your spending never ends up exactly as you budget it so this feature is a life saver.

Compatible with Windows or Mac Operating Systems

YNAB operates on the Adobe Air platform. For those of you not familiar with Adobe Air, what that means to you is that you can run YNAB on either Windows or Mac computers seamlessly. You have to download and install Adobe Air first and then install YNAB. If your wife uses a Mac and you use a PC, you can both work on your budget with no problems.

Use YNAB On Three Different Computers

Each purchase of YNAB comes with a license to use it on three different computers. Now both you and your spouse can look at the finances. If he has a laptop and she has a desktop, no problem. If you do use YNAB on multiple computers, you’ll want to make sure you keep track of the YNAB file and make sure you don’t have multiple versions running around. Using a file syncing tools like Microsoft’s Live Sync can be a great way to ensure you’re using an up-to-date version of your file.

Does YNAB have any flaws?

Overall YNAB’s biggest weaknesses are also its biggest strengths. Because YNAB is built using such specific financial principles, it only works for people who want to follow those principles. It might take some getting used to the budget and how it works because it’s unlike anything you’ve ever seen. But once you get used to it, you’ll appreciate the simplicity and power it gives you over your budget and your finances.

One thing that has taken getting used to for me was the buffer. I had to get used to how the buffer operates and when funds are put into the buffer. But again, once I got used to how it works, I realized that it is a very well thought-out feature and helps you get a month ahead on your budget.

The only additional feature I’d like to see YNAB offer is to show cateogry notes when you print out your budget. Let me explain. You can put a note next to any given category allocation from month to month. This is actually an awesome feature because I find almost every month there’s an exception or unusual transaction and I want to put a note so that I can look back and know what was going on. While you can do this in the software, when you print out your budget those notes aren’t there. And since I’m such a proponent of printing out your budget everytime it’s updated, this would be a great feature.

Summary

YNAB is by far the best budgeting software I’ve ever used. I have a hard time imagining using anything else. I’ve tried paper-based budgets, spreadsheet-based budgets, and industry-leading software such as Quicken. Inevitably they haven’t worked the way I wanted or were simply too much effort and work to maintain. In contrast, YNAB is simple and elegant. It makes it dead simple to create a budget and it holds you accountable for money overspent. It also makes it easy to accumulate money towards a periodic bill, a larger purchase, or a financial goal. If you’re serious about getting your finances under control and making your budget work without a ton of effort, YNAB is the best choice I know of. I use it personally and would recommend it to anyone.



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Disclaimer: I am an affiliate of YNAB and receive a modest portion of the purchases made through this site. This is a way for me to cover the costs of running this website. I make it a point of only recommending products that I either personally use or that I feel are the best in their category. In the case of YNAB, it is the software I personally use and recommend for budgeting.

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More From sjpeer

• How to Create a Master Budget
• 3 reasons most budgets don’t work and how to fix them (a.k.a. How to create a budget that works)
• How to create a zero-based budget

It’s time to create your working budget. Up to this point we’ve created a master budget which helped us prioritized our expenses. It also helped us to make sure on an “average” month we can cover our necessary expenses.

The working budget is a different beast. The working budget is used from month-to-month and is an active and living document. While many expenses in a working budget will be nice and clean like the master budget, there will also be many expenses that are unexpected, inaccurate, and just plain wrong. And that’s ok because that’s how life is. The secret is to create a document and follow a process that will allow you to account for those flaws and surprises life throws at you.

Over the next few posts I will be showing you three basic ways to create your budget. These are listed in recommended order:

1. Using You Need A Budget (YNAB) budgeting software.
2. Using Quicken combined with a spreadsheet.
3. Using pen and paper or a spreadsheet exclusively.

I’ve mentioned in the past a surprise tool that I use to do my budgeting. That tool is called You Need A Budget, or YNAB for short. This is the software I personally use and recommend for budgeting. Believe me, I’ve tried a wide variety of tools and have come up with some pretty cool tricks in the process, but YNAB beats them all in terms of simplicity and effectiveness.

Having said that I will still be showing how to do a budget using the other two options. They can still work well, they just require more work. My wife will actually be doing a screencast showing how she does a zero-based budget using Quicken. It’s a cool little hack you won’t want to miss if Quicken is your tool of choice. Either way, it’s worth checking out the upcoming information on YNAB to see of that tools is right for you.

I’ll be releasing posts in the order listed above which is also listed by preference. This actually ended up being good timing since we’re just starting a new month and it’s a great time to start your budget.

Stay tuned.

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More From sjpeer

• How to Create a Master Budget
• How To Create Your First Working Budget With YNAB
• How To Create Your First Working Budget With Excel Or Pen And Paper