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How to Budget Smart Easy | Budgeting, Expense Tracking App | NetWorth2b Budget App; Personal Finance - YouTube
Channel: NetWorth2b
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Smart money management starts with a budget; but聽
creating a realistic budget is not a one-time job,聽聽
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it's an ongoing process of monitoring and聽
updating. You don't always get it right the聽聽
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first time; and even if you do, when things change聽
the budget has to change the overall process could聽聽
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be time-consuming; but not with the Networth2b聽
Budget & Flow app let me show you how it works.
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First things first, let's identify and organize聽
inflow and outflow budget categories. Where does聽聽
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your money come from?... these are inflow聽
categories... and where does your money聽聽
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go?... organized into predefined groups these are聽
outflow categories. Budget categories determine聽聽
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what information is being collected, and how聽
that information is being collected. So it's聽聽
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important to create categories that represent聽
your necessary and discretionary spending.聽聽
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Now we're ready to set target amounts for each of聽
our categories. Starting with the inflow budget聽聽
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let's update "Income - Net Pay". On the edit聽
screen we select inflow and then select a budget聽聽
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frequency: monthly, quarterly, half-year, yearly,聽
or irregular. These frequencies represent monthly聽聽
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versus occasional expenses. For example if we have聽
a weekly or biweekly pay period the frequency is聽聽
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irregular since the number of paychecks will vary聽
from month to month. In our example we're assuming聽聽
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a semi-monthly or monthly pay period, so our聽
paycheck will be consistent from month to month.
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Back on the summary screen we see our update to聽
the inflow budget, so let's move on to the outflow聽聽
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budget. In this demo we're using predefined聽
categories for expediency, but remember you聽聽
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can add or delete categories to better fit聽
your spending patterns. Notice that each聽聽
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outflow category can be assigned to any group.聽
However these assignments should make sense,聽聽
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after all they are the basis for the outflow聽
analysis function that we'll see later. So far聽聽
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we have focused on monthly frequencies however聽
the health care budget is based on our quarterly聽聽
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scheduled appointments starting in June. For聽
vacation we're putting the total estimated cost聽聽
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in the August budget for now. Since our savings聽
will vary depending upon available funds we're聽聽
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choosing the irregular frequency for maximum聽
flexibility. The same goes for gifts since聽聽
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we're targeting birthdays and holidays. After聽
entering budget amounts for each category,聽聽
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it's time to see the big picture. Looking at our聽
monthly budget we see surpluses in some months聽聽
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and deficits in other months. These variations聽
are caused by the different budget frequencies;聽聽
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but for now we're not going to worry about聽
those monthly discrepancies. We're going to聽聽
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focus on balancing the annual budget, because聽
if we have enough money to cover our financial聽聽
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obligations for the entire year, then the聽
monthly discrepancies can be easily eliminated聽聽
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just by shifting money between periods. At聽
a glance the annual budget shows a deficit,聽聽
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we can tap "Auto Balance" to see the exact amount.聽
The easiest way to eliminate this deficit is聽聽
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to decrease the entertainment budget by $20 a聽
month. Now that the annual budget is balanced,聽聽
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we could Auto Balance the monthly budgets, but聽
remember in August there's a large deficit because聽聽
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of our vacation. Instead of leaving that to Auto聽
Balance let's manually shift some of those dollars聽聽
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to other months... based on the likelihood that聽
some of our travel will be paid in advance. At聽聽
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this point, let's Auto Balance our budget to聽
eliminate those monthly discrepancies. Now聽聽
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when we look through the months we see that budget聽
surpluses were allocated to the reserve build-up,聽聽
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and budget deficits were covered with reserve聽
draws. For each month the budget is balanced.聽聽
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As a practical matter the reserve build-up聽
can be maintained in your operating account,聽聽
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your savings account, or a separate account... you聽
decide. The important thing to understand is that聽聽
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surpluses must be set aside to cover impending聽
deficits. For each month there's a reserve聽聽
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build-up or a reserve draw but not both. However聽
in the annual budget there's a cumulative reserve聽聽
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draw that equals the cumulative reserve build-up.聽
Finally let's move to the budget analysis panel.聽聽
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The upper portion of the screen shows the month聽
versus annual comparison while the lower portion聽聽
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of the screen shows the monthly outflow by group聽
in percentages and in dollars. From the pie chart聽聽
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we can see that the largest portion of the budget聽
is allocated to the household group and the second聽聽
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largest portion is allocated to consumer聽
debt, and this may be a cause for concern.
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Fortunately there is a portion of the budget聽
that goes to reserves so we are building our聽聽
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savings. We can tap "Show List" to see the dollar聽
allocation for each group and then use checkbox聽聽
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selections to calculate subtotals for what-if聽
scenarios. Scrutinizing these allocations is an聽聽
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important part of the planning and goal-setting聽
process. It enables you to create a realistic聽聽
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plan to pay-off debt and grow savings. With a聽
budget in place we're ready to track spending聽聽
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in the cash flow portal... but that's covered聽
in other videos. For smart money management,聽聽
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download the Networth2b apt today,聽
there's a link in the section below.
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