Jason | May 20, 2023
It is time to start budgeting and while there are many options, around here we prefer zero-based budgeting with sinking funds. We are going to allocate every dollar we currently have for a specific category. It is tempting when first starting to budget to allocate dollars from future paychecks, but that is what we will use goals for.
When you log in to Ploutos Budget for the first time you may be a little overwhelmed at everything on your screen, but we will walk you through setting up your first budget here.
Global Add Button
The "+" button in the lower right corner of the application is how you can add new things into your budget.
- Link - Add linked accounts from your financial institution, so data can be automagically pulled in.
- Account - Add a new account to track in your budget.
- Collection - Add a new collection for categories.
- Category - Add a new category to a collection.
- Holding - Manually add a new holding to an investment type account.
- Transaction - Manually add a transaction.
We can't start budgeting without any money, so let's start by adding our accounts into Ploutos Budget. We want to add all of our spending accounts. This will include all savings, checking, and any credit cards you have. We can't have a complete picture of where we are financially if we don't keep track of all our money.
Ploutos Budget provides 2 options when trying to keep track of your accounts. You can keep track of everything manually, or you can link your accounts to your financial institutions and all of your transactions will be pulled automagically into Ploutos Budget and all you need to do is categorize them. There is no right or wrong answer here and don't worry you can change your mind at any time without messing up your budget.
Adding New Account
These values can be changed at any time.
- Account Name - Give your account a name to identify it.
- Account Type - Select the type of account it is.
- Link Account - If you have added a linked account from your financial institution, assign it here.
- Positive or Negative - Adjust the toggle to identify whether this is a positive or negative amount.
- Account Balance - Enter your current account balance according to your financial institution.
One last thing we should do before we start actually allocating our real dollars is set our goals for a month. Now there are many approaches and use cases for goals, but in this lesson we will discuss the simplest and most common.
Our goals can be thought of as a template for a typical month. Now we know there is no such thing as a typical month, but stay with us here. Utilizing goals can help us plan for future long term expenses as well as our normal monthly bills and activities.
Goals are not real dollars and don't have any effect on our actual budget. They are there to help us plan out where our real dollars should go. For example, we all know Christmas is in December every year, but we don't start thinking about it until after thanksgiving. Now that doesn't give us much time to start saving for all the gifts, food, and decorations we will inevitably buy. Another example is if you pay your car insurance premium every 6 months, or you pay your home insurance every year. In these scenarios we can utilize goals to help us plan for these large expenses we know are coming.
Example 1 Fixed Expenses
If our mortgage is $1,000 every month then we set our goal for the mortgage to $1,000
Example 2 Long Term Expenses
If our auto insurance premium is $600 every 6 months then we know we need to set aside $100 every month. So we set our goal for auto insurance to $100.
Example 3 Sinking Funds
You know your car will need tires, brakes, and oil changes in the future, but we don't know exactly when. So we will set our auto maintenance goal to $100 a month. To start to build a mini savings account for auto maintenance. We won't spend all of this money every month or maybe not even touch it some months, but when the time comes for maintenance on our car we will have the money for it.
Budgeting isn't just about saving up money for bills and general maintenance costs. We can utilize goals to save up for that big vacation, expensive toy, or that shopping spree you have been waiting for.
Now that you have all of your accounts created and goals set up you can start budgeting. All of your money in your Cash and Credit Card account groups added together make up your budget. Remember in zero-based budgeting we want to budget our money to $0.00. We don't want it above or below $0.00, if your budget number goes below $0.00 it will turn red which means you have allocated money you don't have and are creating debt, if it is above zero then congratulations you still have more money to allocate towards your priorities.
One of the many benefits of this approach is it doesn't matter where you are in the month when you start budgeting. If it is the middle of the month, and you have already paid some of your bills, or you don't need a month's worth of groceries then you don't need to allocate some or all of the money to that category. Also since we are only budgeting the money we actually have and not any future earnings, inconsistent paychecks are no problem.
Set Goals and Budget
There are multiple ways to move money around in Ploutos Budget, but for simplicity we will demonstrate the most basic way. When looking at your budget if you click on the Budgeted/Goal table cell for a category it will pop up a form for you to set those fields.
- Budgeted - Amount of real dollars we are allocating to this category.
- Goal - Setting a plan for what we would like to budget in this category a month.
We have set our goals and budgeted all the money we currently have to a category now what? Now we track real life by using transactions. If you set up your accounts to be linked these will flow in automagically, and you just need to assign them to a category. Otherwise, we can utilize the global add button to add a transaction manually. Every Time you spend or receive money you need to add a transaction to categorize that event.
If you want to keep track of whether a transaction has posted with your bank yet. Account pages will show summed pending vs posted amounts.
The date the event happened. This date will affect the monthly budget this transaction resides in.
Positive or Negative
A toggle to specify whether this is incoming money (positive) or outgoing money (negative).
If it is outgoing money where was the money spent? If it is incoming money, who paid you?
Transfers - These payees are used if you transfer money from one of your accounts to another. No category will be needed for these transactions as you didn't gain or lose money, you just moved it.
Credit Card - If you have any credit cards they will show up in this list. You select your credit card here when you are making a payment towards your credit card.
Loan Payment - If you are tracking any loans in Ploutos Budget then your loan accounts will show up here. When making a loan payment you would select that loan account here.
When adding a payee you can select from previously used payees or add a new one to the list.
Which category are we pulling the money from for this expense? If you are receiving money i.e. a paycheck, then you will set the category to "Budget". You can use "Split" to select multiple categories.
Which account did you spend this money from?
Optional notes area for you to enter anything you would like. Can be used to write a check number or a brief summary or what you bought i.e. Bought clothes.
Optional flag field can be used to help group transactions that may have separate categories, i.e. tax-deductible expenses. You can also add labels to each flag, so you will never forget what you want each color to mean.
Any remaining balance in a category at the end of the month will roll over into the next month. This is how we build up sinking funds. Not every category needs to be a sinking fund i.e. our Fixed Expenses. We don't need to build up a sinking fund for our monthly bills that are relatively the same every month. Ultimately the decision is up to you though.
If you don't want the balance of a category to roll over to the next month, then just adjust the budgeted amount in that category to zero out the balance. The excess money will go back into your Budget amount. You can use the Budget Quick Actions to easily zero out any category balances you would like.
The last thing we want to do every month is make sure our account balances match what our banking institutions say our account balances are. So just log onto your banking website and check the current balance and make sure it matches what your account balances are in Ploutos Budget.