Planning your budget can be a daunting task, and this is often the reason people never get around to sorting out their financial life. Thankfully, NeoBudget offers some tools that make this very easy. Using the income allocation tool in NeoBudget, you can easily determine how much money you need each month to pay your bills and meet your savings goals.
This tool can even figure out your monthly budget for irregular or long-term expenses. For example, auto insurance is often a semiannual (6-month) bill. NeoBudget will figure out how much you need to save out of each paycheck in order to have enough to pay that bill in 6 months. No more panic when the bill comes due!
1. Enter your paycheck information
The first thing to do is go to Settings and click on Income. You need to create an entry for each regular paycheck that you receive. This doesn’t need to be a fixed amount each month, but this tool assumes a fixed amount. (Handling irregular income is covered in another post.)
Click on “New Income Source”:
Now you’ll see the Income Editor. Enter the name of your employer, and the amount of each paycheck you receive. You also need to specify the pay frequency. The most common payment frequencies are shown which includes every other week (bi-weekly), twice per month (semi-monthly), and weekly. This is used in the budget calculations later.
2. Enter fixed expenses
Some expenses that you have are easy to figure out. You may know that you spend $50 per week on gas, or that you want to save $25 per week for eating out. In the example below, we have a bi-weekly paycheck (every two weeks) and we’re saving $50 out of each paycheck for eating out.
Each column represents a separate paycheck for the month. Notice the headings “1st check,” “2nd check,” and “3rd check.” Notice that the 3rd check is highlighted in green? That’s because when you’re paid bi-weekly some months have three paychecks and some have two. You don’t need to worry too much about that, because NeoBudget handles the complex math needed to average it out. In general, you can be assured that if you use this tool, things will average out and be fine.
3. Enter complex bills and savings goals
Not all of your envelopes will have such simple savings goals. For example, your mortgage envelope might include all the expenses related to your home. By clicking on the “Edit” link in the “Budget” column, you’ll see a budget calculator that helps your calculate your monthly savings need to meet your goals.
In this example, I know that my monthly mortgage payment is $984, I have an annual property tax bill of $1250, and every six months I have to pay homeowner’s insurance of $312.50. By entering all these values and specifying the frequency of each expense, NeoBudget does all the complex math to calculate your monthly budget. This is the amount you need to save every month to ensure you have enough money to pay these expenses.
4. Fund your monthly budget from your paychecks
Now that you know how much to save each month, you need to fund it from your paychecks. You can click on the amount and it will automatically distribute it evenly across your envelopes. Or, you could do it yourself if you want to save more from the first paycheck and less from later ones.
You may notice in the example below that the three paycheck allocations don’t add up to the monthly budget amount. Remember that the 3rd paycheck column is a bit special, in that you don’t get that paycheck every month. NeoBudget calculates the amount you need from each paycheck spread out across the whole year. So you may get two bonus paychecks (3rd checks) in a year, not every month.
Using this tool, now you will know that you’ll have enough money to cover your expenses. When you record your paychecks as you’re updating your budget, simply choose the income source and paycheck number from the list, and the amount will be automatically distributed across your envelopes (see below).