Setting up Your Budget with Quicken

Teaching Tool 30C: Quicken 3 – Setting up your Budget Quicken 2012 Personal Finance: Another Perspective

Introduction

One of the biggest struggles many have with their finances is that they do not take adequate control of their money and spending. Since many people don’t realize how much of their income is being allocated to items like eating out at restaurants or going to the movies, they often find themselves at the end of the month questioning where all of their money has gone.

In this Teaching tool we will go through the basic steps of setting up your budget in Quicken and running a report at the end of the month to evaluate how well you actually performed.

Creating a Budget in Quicken

The following are the steps you would take to create a budget within quicken.

Step 1: Open up Quicken. Select Planning from the Menu Bar and then select Budget. A window titled “Budget” will now appear. If this is the first time you have created a Budget, all you will see is a button that says “Get Started” click on it. “Create a New Budget” window will appear. You’ll have to create a budget name and select whether you want an “automatic budget” or an “advanced budget.” If you are new to Quicken, you probably do not have enough data yet to have the program automatically set up your budget. What you will do is click on the manual option and press “create advanced budget.” If you have created budgets in the past the view in the Budgets window may be different. You may also see a section labeled “Current Budget” and “Other Budgets”. If this is the case, you will also have the option under “Budget Options” to copy your current budget. If all three sections exist, you may choose to start over on the current budget, open an older budget, or perhaps you will still want to create a new budget from scratch.

Step 2: Once you begin creating a new budget or editing an existing one, you will first be taken to the Income tab. On the bottom left side of the window you will see a button called “Add category to budget…” Press this button and a window will appear and give you a drop down menu of different categories. Many of these are categories Quicken has preset and you will not need. Highlight the categories that you wish to include in your budget (Note: In a previous tutorial we talked about creating personalized categories and/or subcategories. This would be the ideal time to use those categories which you think are most applicable to your spending.). Once you have selected your categories press OK.

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Step 3: Now we will begin the fun of developing your budget or your spending plan! Hopefully one of the categories you chose had to deal with some sort of salary. Select one of your categories and begin to plan your budget. There are three different methods in which Quicken allows you to set up your budget:

Average Amount – This is the simplest way to create your budget. If you have an income/expense item that is virtually always the same and occurs at a constant rate, this would be the option to choose. For example, if your salary is $48,000 a year, under the budget section where it asks you for the amount, you would enter 48000. For the period, you would select yearly and Quicken will automatically divide this into how much of your salary should be budgeted for each month.

Monthly Detail – This option lets you personalize you budget a little more. For those of you who are students, this is a great way to plan for items that occur in frequently like tuition bills that happen only in January and September. If you have a job where you know your salary is going to vary from month to month, this would be the best way to budget for those fluctuations.

Quarterly Detail – This is a great way to plan for things that you know will only be taking place on a quarterly basis. For example, some auto insurance companies require that you pay on a quarterly basis. Also, for the few of you that own your own business, the IRS requires a quarterly tax payment. These quarterly expenses can sneak up on you if you are not prepared for them!

When you decide what budgeting method you wish to use for each specific category and have entered the dollar amounts that you wish to allocate for that specific category, press the Done button and this information will be entered into you budget by Quicken. Follow this process for every income category. Also, note that this will be the exact same steps you will follow when budgeting for savings and expenses.

Step 4: Once you have figured out how to budget for your income, the rest of the budgeting process will go by smoothly. You have learned about budgeting the better way in which you pay the Lord first, yourself second, and then plan for your expenses. The most challenging task you now have is to follow the same steps you took to set up your Income budget to set up your Savings budget and eventually your Expense budget. From the Categories list, find your savings account and follow the steps to plan how much you want to be saving each month, you’ll use the “Transfer Out” category.

Step 5: The final step in setting up you budget is budgeting how much of your income you will allocate to expense categories. You will notice at the bottom of this window in the middle of the screen Quicken has subtracted the amount of money

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you want to save each month from your total income and gives you the amount of money you know have left over to plan for your expenses. Since you probably have many more expense categories than income categories this will take much more time and effort in completing you budget, but the difficulty hopefully will be at a minimum. If you have taken the time to personalize your quicken categories to match your spending, this will be a much easier task for you. However, if you are new to the budgeting process and have no idea where and on what you spend you money, this may take more time, but will be a great learning project for you.

Step 6: Once you have completed all of your budgeting you can now review your budget. If you have set up a budget that has different income/expense/savings amounts in different months, this will be a very important page for you to review. You can now look at each month during the year and see the months in which you will have surplus cash on hand and the months that your expenses will be greater that your income. Those of you who have short periods of time where you spend the majority of your income on things like college tuition and books might notice that you run out of cash and need to find other resources to help pay for these expenses.

Step 7: You have now set up your budget. Over the next month you will want to record all of your spending in Quicken. When it comes time to run your budget report, you will need to follow a few simple steps. On the Menu bar select Reports, then Spending, and finally you will have the option of choosing “Budget” or “Monthly Budget”. The “Budget” option will give you a year to date report of your spending versus your budgeted amount up to that point in the year. The “Monthly Budget” option will give you a break down of monthly actual, budgeted, and difference amounts as well as a totals column.

Step 8: As with many things in Quicken, you may customize this report to more accurately meet your needs. By select the customize button at the top right part of the window you may select specific options you desire (including custom dates)

Hopefully this has helped you get excited about taking control of your finances. We are all in different circumstances and our budgets may be simple or complex. The important thing is that we establish them and live by them. Some of you may even be in a situation where you receive allowances or living stipends. I encourage you to still strive to be wise stewards over this money as it gives you the opportunity that many don’t have in being able to receive an education without having to incur substantial levels of debt. As we use our budget as a tool to help us plan how we will allocate our finances, you will be able to meet many of you goals and stay out of the financial burdens that affect many people in society today.

Disclaimer

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The purpose of this material and this class is to help you get your financial house in order and to help you on your road to financial self-reliance. If there are mistakes in this material, please bring them to our attention, and we will correct them in upcoming versions. The teacher, and BYU, specifically disclaim any liability or responsibility for claims, loss, or risk incurred, directly or indirectly, by using this material.

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