About Budget Magic

Would you like to work some magic on your home budget?  And have fun in the process? Now you can!  BudgetMagic is a simple electronic budgeting system that can help anyone with any income take control of personal spending.  If you stick with BudgetMagic, you’ll see that you can live comfortably on your income and even save for the things you really want, but thought you could never afford.

What is BudgetMagic?
It is a modern version of a time-tested system: years ago, folks devised a simple yet effective budgeting method known as “the envelope system.”  To use the envelope system, a person set their budget for a particular expense, and then placed that amount of cash into a paper envelope.When they wanted to spend money in that expense category, they took cash from the envelope. When the envelope was empty, they knew they had used up their budget for that expense.

Electronic Envelopes
BudgetMagic is today’s version of the same concept. Instead of cash and paper envelopes, BudgetMagic uses virtual money in Electronic Envelopes. This is more efficient and more secure than the old method.  For each expense category you set up, BudgetMagic virtually stashes the designated budget amount into the Electronic Envelope.  Once per week you enter information into the system to record what you have spent, and the amounts are deducted electronically from the “envelopes.”  In real time, you are able to see exactly how much is left in each budget envelope.  The secret to success with BudgetMagic is to keep the envelopes up to date, and to use the information to control your spending and stay on your budget.When the budget time period is over, you simply click the “Reset” button and the envelope is “re-filled” with the budgeted amount.

Budget Time Periods
BudgetMagic monitors your spending within two different time periods: Monthly, and Yearly. Each of these time periods has its own budget and its own set of Electronic Envelopes. The Budget Worksheet provides a framework for setting up these budgets, including an extensive list of sample categories. The Monthly and Yearly budgets work together as one integrated BudgetMagic system.

The Monthly category applies to those expenses which occur on a regular basis, each month. They can be monitored each month, because they generally occur each month.

The Yearly category covers all the other expenses; those which occur occasionally throughout the year, but not frequently enough to consider them monthly budget items. Because these expenses do not occur on a regular basis, they tend to "sneak up" and surprise us. BudgetMagic provides a way for you to plan and prepare for these expenses too, so they do not catch you off guard and unprepared. Each month you will set aside, as a Monthly expense, enough money to keep you financially prepared for those occasional (Yearly) expenses when they come along. The Budget Worksheet will guide you in setting up this process.

Fixed and Controllable Expenses
Nearly every household budget includes some expenses that are "fixed," along with others that are "controllable." The fixed expenses are those that stay the same each month, or each year. For instance, a fixed mortgage payment, rent payment, or car payment. Controllable expenses, on the other hand, are those which may be changed or influenced by your spending behavior. Dining out, for example, is an activity of choice and a cost you can control. Both types of expenses, fixed and controllable, need to be included in your budget. Once your budget has been formed, BudgetMagic is particularly helpful in influencing your spending behavior to master your controllable expenses.

Bank Accounts
To help you to see very clearly the distinction between your Monthly and Yearly expenses, BudgetMagic recommends that you set up two separate bank accounts. One account will be used for depositing your Monthly Income and paying Monthly expenditures; the other account will be used to pay your Yearly expenditures. You should be able to write checks from either account. You will want to move money from one account into the other at least once per month, so it is convenient to set up both accounts at one bank. That way, you can easily move funds using Internet banking or telephone transfers. If you already have one or both of these accounts, you do not need to set up new ones. For simplicity and security, BudgetMagic does not interface or link with any of your bank accounts.

How much money do you need to get started? Ideally, we recommend that you have an amount equal to one month's budget total in your Monthly account. For the Yearly account, we recommend you keep a cushion equal to at least half the total Yearly budget. However, you shouldn't let it stop you if you don't have that much money saved today. You can start using BudgetMagic right away to help you build that cushion of financial comfort!

Savings and Investment Programs
BudgetMagic is compatible with any savings or investment programs that you have now, or wish to have in the future. Whatever amount you choose to invest in such programs will simply become one of the spending categories in either your Monthly or Yearly budget. By following BudgetMagic's disciplined approach to spending, you will enhance your ability to fulfill your saving and investment goals.

Simplicity
BudgetMagic is simple to learn, and easy and fun to use. It focuses on one main area of the personal finance process: controlling your expenses so they don't exceed your income.

Are you ready to get started? Let's go!