What Is Budgeting Software?

Without a budget, you could end up overspending, missing payments or racking up debt. A personal budget shows you where your money should go. By tracking your spending and aligning that spending to your budget, you can see where your money actually goes. Budgeting software helps you both create a budget and manage that budget.

Types

Budgeting software comes in two forms: software programs and online-based programs. Online-based programs, such as Mint and Mevelopes, allow you to create and track a personal budget from any computer with Internet access. Software-based programs, such as Quicken, allow you to create a budget and monitor spending on your personal computer. Different software brands use different methods of budgeting. For example, Mevelopes uses the envelope-budgeting system. With this system, you create envelopes for all of your major monthly expenses and then add money to the envelopes -- or remove it -- throughout the month.

Features

All budgeting software allows you to create categories within your budget such as groceries, gasoline purchases and mortgage payments. Some programs, such as Mint, allow you to link your online banking accounts. Once linked, the software tracks your spending automatically and deducts your spending from your budget categories. Some budgeting software also allows you to create graphs and charts that illustrate your spending habits, net worth and other financial information.

Advantages

Using software to create and manage a budget is quick and easy. With the software, you can create pie charts or graphs to show you where you stand financially, making it much easier for you to see a bigger financial picture. Automatic tracking makes it easier for you to monitor your spending habits. Budgeting software removes the chance of math mistakes by doing the calculations for you. Many programs also have advanced features that let you track your investments, net worth or create personal goals.

Disadvantages

Budgeting software programs can take more time to manage than using a pen and paper to create a personal budget. The software has a learning curve for people new to computer software. Online-based programs may pose a security risk. Since the program saves your personal and financial information, you could become a victim of identity theft if a thief steals information from the website.

References

• Bankrate; Which Software Helps You Budget Best?; Jennie Phipps; September 2004
• Quicken: Set Goals and Save
• Mint.com: How it Works
• Mvelopes: Product Overview