What to Look For in a Budgeting Tool

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What to Look For in a Budgeting Tool

Budgeting tools vary from the simple to the very complicated, from free to expensive, from paper to desktop to online. Some are limited to simple recording of your income and expenses, while others go all the way up to complex forecasts and analyses.

If you have never used one before, then you may not know what to even look for. But if you have, then take stock of what you need in a budgeting tool and then begin the search.

Research

You must invest some time in researching the options. If you have online access to your financial accounts at your financial institution, then it may have budgeting tools already up, with your account data already in them. Check there first; a little time tooling around will show you the great perspective they can provide on your money.

An online search for phrases like "budgeting tools" will bring up dozens that you can research. Also, there are reviews in the media every year that cover the plusses and minuses of each program.

Try them out

Many online tools let you try them free for a while before making a purchase. A few are free for as long as you have an account open.

Compare prices and features

Here are some factors to consider:

• Ease of use. This is what will probably make or break it for you. Programs that are formatted and organized well are more enjoyable to use. The more effortless a program is, the more likely you will want to work with it.
• Personal vs. business. Business budgeting tools are more complex and provide more services, such as financial statements and sometimes tax information. Personal tools are a little more limited, but should be fine for individuals.
• Flexible categories. Can you add new categories or must you use the ones provided? How likely is it that you will need to add new categories? An upcoming change in your lifestyle may prompt you to need them.
• Editability. Can you activate features that are otherwise optional? Can you create new categories of income and expenses? To what extent is editability/customizability a plus for you?
• Price. One of the more common features to consider is price. As a rule, you will get more features and access with a program that you pay for. If you are on the fence about whether to pay for a program, consider that it may return a lot of money in savings to you, which can make it pay for itself many times over. If it is for a business, then you can take a tax deduction on it. And remember that many programs will let you use them for free on a trial basis.
• Security. Make sure there are protections in place such as 128-bit encryption. It’s also a good idea if the budgeting tools you are considering have practices that are monitored and verified by third-party services, such as VeriSign. Look for tools that routinely test and attempt to "hack" their own software.
• Connection to your bank accounts. Budgeting tools need the clearest picture possible of your finances. That’s why most of them can connect to your financial accounts and download your data, which they use to produce reports and budgets.
• Features. Do you want a simple program that keeps track of your income and expenses, or do you also want analyses and financial projections? Expect to pay more for programs with the latter.
• Communication. Many budgeting tools send you alerts when there are large or unusual changes in your accounts.