If it’s been a while since you balanced your budget using the “Balance” tab in NeoBudget you might be in for a surprise.  Hopefully everything will work just fine, but if there was any data entry or bank error along the way it’s very likely that your bank statement won’t match the amount that NeoBudget shows.

The most likely reason for this is that you missed entering a transaction somewhere, or mistyped a transaction amount.  The best way to fix this problem would be to go through your bank statements and match up each transaction one at a time with NeoBudget.  But who wants to do that, right?  I mean that would take forever.

The simpler way to fix this problem is to create a fake transaction in NeoBudget.  Lets say your bank statement says your balance should be $1000, but NeoBudget shows $1025.  You will need to create a transaction that will bring NeoBudget in line with your bank statement.  In this case, you would go to the Subtract tab and create a debit of $25.  This will subtract $25 from your budget.  Your balance will now be $1000 which is the same as your bank statement.  Now when you go to the Balance tab in NeoBudget, you can select all the transactions and it should balance.

A better way

“An ounce of prevention is worth a pound of cure.” – Benjamin Franklin

To prevent this from happening in the first place, be sure you’re using the Import Wizard in NeoBudget instead of manually entering transactions.  This will prevent you from mistyping any amounts.

Also, be sure to balance your budget every time you update NeoBudget.  The whole purpose of the Balance tab is to help you catch errors.  It is much easier to catch errors when you only have a handful of transactions that you’ve just entered, rather than hundreds for the past year.  So, take a few extra minutes after you update your budget and be sure to balance it!

Planning your budget can be a daunting task, and this is often the reason people never get around to sorting out their financial life.  Thankfully, NeoBudget offers some tools that make this very easy.  Using the income allocation tool in NeoBudget, you can easily determine how much money you need each month to pay your bills and meet your savings goals.

This tool can even figure out your monthly budget for irregular or long-term expenses.  For example, auto insurance is often a semiannual (6-month) bill.  NeoBudget will figure out how much you need to save out of each paycheck in order to have enough to pay that bill in 6 months.  No more panic when the bill comes due!

1. Enter your paycheck information

The first thing to do is go to Settings and click on Income.  You need to create an entry for each regular paycheck that you receive.  This doesn’t need to be a fixed amount each month, but this tool assumes a fixed amount.  (Handling irregular income is covered in another post.)

Click on “New Income Source”:

Now you’ll see the Income Editor.  Enter the name of your employer, and the amount of each paycheck you receive.  You also need to specify the pay frequency.  The most common payment frequencies are shown which includes every other week (bi-weekly), twice per month (semi-monthly), and weekly.  This is used in the budget calculations later.

2.  Enter fixed expenses

Some expenses that you have are easy to figure out.  You may know that you spend $50 per week on gas, or that you want to save $25 per week for eating out.  In the example below, we have a bi-weekly paycheck (every two weeks) and we’re saving $50 out of each paycheck for eating out.

Each column represents a separate paycheck for the month.  Notice the headings “1st check,” “2nd check,” and “3rd check.”  Notice that the 3rd check is highlighted in green?  That’s because when you’re paid bi-weekly some months have three paychecks and some have two.  You don’t need to worry too much about that, because NeoBudget handles the complex math needed to average it out.  In general, you can be assured that if you use this tool, things will average out and be fine.

3. Enter complex bills and savings goals

Not all of your envelopes will have such simple savings goals.  For example, your mortgage envelope might include all the expenses related to your home.  By clicking on the “Edit” link in the “Budget” column, you’ll see a budget calculator that helps your calculate your monthly savings need to meet your goals.

In this example, I know that my monthly mortgage payment is $984, I have an annual property tax bill of $1250, and every six months I have to pay homeowner’s insurance of $312.50.  By entering all these values and specifying the frequency of each expense, NeoBudget does all the complex math to calculate your monthly budget.  This is the amount you need to save every month to ensure you have enough money to pay these expenses.

4.  Fund your monthly budget from your paychecks

Now that you know how much to save each month, you need to fund it from your paychecks.  You can click on the amount and it will automatically distribute it evenly across your envelopes.  Or, you could do it yourself if you want to save more from the first paycheck and less from later ones.

You may notice in the example below that the three paycheck allocations don’t add up to the monthly budget amount.  Remember that the 3rd paycheck column is a bit special, in that you don’t get that paycheck every month.  NeoBudget calculates the amount you need from each paycheck spread out across the whole year.  So you may get two bonus paychecks (3rd checks) in a year, not every month.

Concluding thoughts

Using this tool, now you will know that you’ll have enough money to cover your expenses.  When you record your paychecks as you’re updating your budget, simply choose the income source and paycheck number from the list, and the amount will be automatically distributed across your envelopes (see below).

Before I had created NeoBudget I tracked my budget in a spreadsheet. This worked well, but it was very time consuming. My normal procedure was to print out my bank statement, then go down the list and enter each transaction by hand. Without fail when I reached the end I had mistyped a transaction or two and had to spend some time tracking it down. All told, I would spend about and hour or two every week updating my spreadsheet. I thought there had to be a better way.

The Import Wizard

When I created NeoBudget, one of the first things I wanted was the ability to import my bank statement directly. The import wizard in NeoBudget does exactly this. It has cut the time spent updating my budget down from 1-2 hours to 15 minutes per week.

Here’s how it works. It’s a simple four step process:

Step #1: Upload your statement

Step #2: Select the transactions to import

Step #3: Assign each transaction to envelopes

Step #4: Confirm that everything looks right

Manual Transaction Entry

Of course, it’s also possible to manually enter transactions. There are any number of circumstances where you might want to record a transaction before it clears the bank. My wife often records our grocery purchases right away so we can keep up-to-the-minute track of that envelope. I also record all checks we write so they come out of the budget immediately (you never know how long it will be before someone cashes a check).

To do this, simply click on the “Add $” or “Subtract $” tabs at the top of the page.

A question I frequently hear is: “Will I end up with duplicates for some transactions when I manually enter something and later import transactions from my bank?” NeoBudget is smart enough to notice duplicates. On the second step of the import wizard, NeoBudget will notify you of transactions it thinks you might have already entered into your budget. You can make the final judgment call.

The import wizard is a real time saver. For me, it saves at least an hour a week over my old spreadsheet budget. It’s just one of ways NeoBudget helps take the sting out of budgeting.

Recording a transaction in NeoBudget is easy, yet powerful. You can take all of the funds from one envelope, or split it across several envelopes. This tutorial shows the process of recording a “Subtract $” transaction in NeoBudget (essentially, a debit).

First, click on the “Subtract $” tab at the top of your account page. You can also get here through the import wizard when it comes across a debit or charge transaction.

Enter all the details about the transaction such as whom it was to, the date, and any other details you wish to remind yourself of later.

Next, enter the amount of the transaction. If you are in the import wizard, the amount will be added for you automatically. Note that the “Save” buttons are disabled and that the “Remainder” shows the total of your transaction. The “Remainder” is the amount of the transaction that has not been assigned to an envelope. The buttons are disabled until the “Remainder” is $0.00 meaning that the entire amount has been distributed to envelopes.

In the case shown in the image below, we have set the amount to $68.45 but have not said which envelopes to take that money from, so the “Save” buttons are disabled.

The final step is to say which envelopes the money should be taken from. In the example below, we are taking the entire amount from Groceries. However, you could just as easily take $10 from Clothing and $58.45 from Groceries.

Once you have assigned the entire amount, the “Remainder” value will be $0.00 and the “Save” buttons will be enabled, allowing you to save the transaction and continue using NeoBudget.

Budgeting can be a challenge for anyone who has an irregular income.  This includes freelancers, students, or anyone whose income is not paid at regular intervals.  There are a couple ways irregular income can be handled in NeoBudget.  Here’s the method I recommend.

First, create an envelope labeled “Income”.

When you receive income, don’t use the “income allocation” feature in NeoBudget. Instead, just record it as a regular deposit and stick it in your “Income” envelope. This envelope will accumulate all your income throughout the month.

Now, create a fake income source. You will use this to transfer money out of your “Income” envelope once per month. To do this, set up an income allocation. Set the amount to $0.00.

Figure out how often you want to pay yourself (I recommend once per month because it’s easier to track). Figure out what you want your “salary” to be. That is, the fixed amount you will transfer from your Income envelope to your other envelopes each month. Lets say it’s $2000. In the income allocation, put -2000 (negative 2000) in the Income envelope. Then, distribute the $2000 across your envelopes as you need.

Then, at the first of the month, go to “Add $” and select the “Income” button. Record this fake transaction. Since the amount is actually $0, this won’t upset the balance of your budget. It only moves money from your Income envelope to your other envelopes.

In this way, you’ll also build a cushion in your Income envelope for when times are a bit harder and income is sparse. If a lot of money builds up in the Income envelope (more than you need as a cushion), then transfer some of it to a savings account.