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Using BudgetMagic
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Set Up Your Balanced Budget
Your first step with BudgetMagic is to create a budget that is balanced to your income. To create this balance, everything will be tied back to your Monthly Income. Don't worry - BudgetMagic makes this super easy! It will only take a short while to set up your budget by referencing past expense and income documentation, including pay stubs, credit card statements, checkbook register, monthly bills, etc. BudgetMagic provides an extensive list of common expenses so you won't forget anything. You can add your own expense categories too, customizing the system to your own situation. The good news is you only have to set up your budget once, but you can modify the amount you assign to any expense category at any time. |
First, set up Yearly expenses. Set the Budget Period to Yearly. Enter the amounts you wish to budget in each category that applies to you. Add categories if you need to. BudgetMagic totals it all up for you. It also calculates the number that is 1/12 of your Yearly budget. That number is called "Deposit to Yearly" and it automatically becomes one of your Monthly expense envelopes. Each month, you will move this amount from your Monthly bank account into your Yearly bank account to provide for your Yearly expenses. (If you start using BudgetMagic in the middle of the year, the system can divide the Yearly budget by the number of months that actually remain.)
Next, plan your Monthly budget. In the Budget Worksheet window set the Budget Period to Monthly. Once again, you'll see an extensive list of categories, and you can also add your own. In the upper left, enter your monthly income as a reference. This is the sum of all of the sources of income that you receive each month. This is the number to which you will match your expenses in order to create a balanced budget. This income should be deposited each month into your Monthly bank account.
Tip: To keep the process simple and practical, when tallying your job income use the amount which is your net pay, also known as "take-home" pay.
Next, enter the amount you want to allow yourself to spend every month for each category. Remember, the first Monthly expense category is Deposit to Yearly which is automatically calculated by BudgetMagic based on your anticipated Yearly expenses. (This is the amount you will move each month from your Monthly bank account into your Yearly bank account.)
Each time you enter an amount into a budget category, the line listing Total Monthly Expenses is updated with the total of all the budget amounts you have entered. Your goal is to have the sum of your expenses equal to or less than the Total Monthly Income you entered at the top of the page. If the expense totals exceed that number, then you must lower the budgeted amount for one or more categories until you bring the budget into balance.
Tip: Enter Fixed expense categories first. Then work on the budget amounts for Controllable expenses. You may need to go back into the Yearly budget and lower the budgeted amounts for some of those categories to make the monthly Deposit to Yearly amount smaller to help balance the budget.
Tip: Create a "Contingency" Fund. For each of the Monthly and Yearly budgets, it is advisable to have a category called "Contingency." This category provides a cushion to cover unexpected expenses. It's up to you to decide the Contingency amount you want to build into your budget. Just make sure to provide enough to keep unexpected expenses from ruining your budget plan!
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Start Using the System!
Once you have your budget in balance, you are ready to start using the system!
Use the Electronic Envelope feature to see that BudgetMagic has created Electronic Envelopes for each of the expense categories you completed. Each envelope is represented by a line item in the table showing the expense name, the amount budgeted, the amount spent to date, and the amount remaining to be spent before the time period (month or year) ends.
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About once each week, use the Enter Expenses feature to enter all of the expenditures you have recently made. This is where you make the magic happen! To get started, first select the correct budget period (Monthly or Yearly). Then enter your expenses, placing a check mark in the checkbook or on the receipt or other record to note the expense has been entered. (The Memo feature provides another way to track your entries, via the Journal). Your expenditures are automatically deducted from the Electronic Envelopes as you enter them, and the current amount remaining in the envelope is displayed. Watching these envelopes and keeping their amounts above zero is your key to staying on budget. Print them out and post on your refrigerator, or carry the printout with you. When you have the information in hand, you know where you stand! |
Throughout the week, be sure to keep reliable records of every expenditure. For checks written, record in your checkbook ledger; keep a notepad by your computer, or do a print-out to record online shopping or banking transactions; and for debit card, credit card, or cash purchases, keep the receipt. These will provide the reference materials you need when you enter your expenditures each week.
Tip for credit or debit card purchases: If you enjoy the convenience of paying with a credit or debit card, this works just fine in the BudgetMagic system, provided you record the transaction as if you spent cash. As a purchase is made by credit or debit card, you keep the receipt and enter the expenditure right away (without waiting for the credit card statement or bank statement). That way, your Electronic Envelope stays current to what you've really spent. Keeping your Electronic Envelopes up to date by entering all expenses each week is the key to staying on track.
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Transfer money from one envelope to another. BudgetMagic builds flexibility (and fun!) into your budget by allowing Transfers: A surplus in one expense category may be transferred into another category. For example, maybe one month you decide to wash your car at home and won't need the money you budgeted for the car wash. You could transfer that surplus amount to the "Entertainment" category and have an extra night at the movies without blowing your budget!
Remember, you are just transferring "virtual" money. The BudgetMagic Transfer feature is simply an allocation function that gives your budget added flexibility to move budget surplus from one Electronic Envelope into another. It allows you to change the amount remaining to spend in a specific expense category, but it does not alter the original amount budgeted for that category or upset your balanced budget. |
Reset the Budget
At the end of the budget period you will need to "re-fill" your envelopes.
- Simply go to the Electronic Envelope window, set the Budget Period to the one you wish to start over
(Monthly or Yearly), and click Reset. Everything will reset automatically to begin a new Budget Period.
Periodically, you may want to revisit the Budget Worksheet to change your Monthly Income and your budgeted amounts as circumstances change.
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Refer to the Journal
The Journal tracks all your expenses and transfers, and includes an optional memo for expense entries, so you can always look and see all the entries you've made at a glance. If you're not quite sure if you entered something, you can confirm it in the Journal. The Journal provides a simple summary of spending that can help you create an even better budget next year. The information also helps you track tax-deductible expenses!
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