How to Set Up a Budget in Quicken

Budgeting your personal income and expenses is a critical part of your personal wealth management plan. One of the best tools to use for budgeting and expense tracking is Quicken. Quicken allows you to download your financial activity from your bank, categorize each item into categories and track spending against budgeted amounts. Setting up the initial budget in Quicken is a relatively easy process that will help you keep a handle on your cash flows.

Things You'll Need

• Quicken software
• Past invoices and bills for expenses

Instructions

1. Once you have installed Quicken on your computer, choose the "Planning" drop down box at the top and select "Budget." You will be asked to name a new budget. It is useful to create a new budget for each calendar year, so name your budget something like "2009 budget." You can use this budget as a template for future budgets so you won't have to go through all of these steps again.

2. When you select "Create Budget," you will be asked for the time period of your budget. Choose the current fiscal year even if some of it has passed. You will also be asked if you want your budget figures to be monthly or quarterly detail or an average. Choosing "Monthly Detail" gives you the most accurate picture of your budgeted amounts. Choose "Round to Nearest $" because you don't need pennies in your budget.

3. The next two screens that appear are the Income and Expense screens. Click on the "Choose Categories" button on the bottom left. Here you can choose which income and expense categories you wish to include in your budget. If you have already been using Quicken to track your actual spending, the categories you have set up will be here along with Quicken's standard categories. Choose the ones you want to budget for. At the bottom of the list are transfer accounts. These are the asset and debt accounts you have already set up so that you can track monthly money transfers to your savings account or payments on your credit card balance for example. Keep in mind that you add or subtract categories from your budget later on.

4. To the right of the categories window is the window where you can enter your budgeted amounts for each category. As you click on each category, the box will change accordingly. Under "Method", choose "Average Amount" if you are budgeting the same amount for that category every month. This allows you to enter the monthly amount and the program will apportion it to each month. If your budgeted amounts are different, choose "Monthly Detail". This allows you to enter a different amount in each monthly box for that category. You can choose to be alerted if your spending in that category goes over a certain dollar amount or a certain percentage of your budget each month. Set your budget amounts based on your historical spending in those categories or your planned spending.

5. When you are done setting up your preliminary budget, click the window closed and your changes will be automatically saved. When you want to go back in and change your budgeted amounts, go through Step 1 again to get back to your budget. Select it and you will be back to the entry screens.

6. To review how your actual spending relates to your budget, choose "Reports" at the top of the screen, then "Budget." This report gives you comparative amounts for actual and budget with the difference. You can change the time period you want to look at in this report as you may want to look at a certain month or year-to-date.

Tips & Warnings

• If you do not need to track payroll withholdings in Quicken, simply enter salaries as the net or "take home" amount. This is the amount that will affect your cash flows.

• If you pay for an expense on a quarterly cycle, do not average the amount over the three months. Instead, put the whole amount in the month it will be paid. This will help you understand your cash flows better.