02.Plan and control
Once you’ve gathered the data and checked to see where the money is going, you may have already identified areas you need to get under better control. This is where a budget comes in – it’s a plan of where and when you want to spend your money.
Back in the day when cash was king, you could set a budget with a row of jam jars labelled “rent”, “food”, “clothing” and so on. As you got paid, the money went into the jars. When each one ran out, that was the end of that kind of expenditure for the week or the month. Any left over could go towards a holiday or evening out.
This is the principle behind the method known as envelope budgeting, with the jam jars becoming virtual envelopes in PFS packages. You can make this just as simple or complex as you like, but bear in mind that managing expenses this way requires up-to-the-minute records. Whenever you buy something, you need to take the equivalent in virtual money out of your virtual envelope. Some packages support this methodology with smartphone apps (EEBA - Easy Envelope Budgeting Aid - is shown to the left), so you can keep track of expenses on the go, but this level of input isn’t realistic for everyone.
What you get
All the packages here provide summary reports of your data, both line-by-line and in various graphic formats. Typically, you can choose reports such as:
- Cash flow analysis
- Expense analysis
- Budget vs actual spend
- Credit card use
- Personalised reports
- Set budget goals
Here are examples of reports from ANZ Money Manager. Other applications provide corresponding reports.