Learning how to create a personal budget is something that we care about here at Mint. Learn more with great personal budgeting tips in our blog article index.

We’ve all heard that “we are what we eat”. Is it equally true that how we choose to spend our money also defines us? Are we what we spend? Do we try hard enough to create a personal budget? And if so, then shouldn’t we make sure that our spending choices align with our personal goals? Are you curious to discover how well or poorly your spending reflects your personal priorities?

For example: Let’s say your personal goals include:

1. Create a Personal Budget
2. Getting in better shape (and reducing your carbon footprint) by riding your bike to work once a week
3. Becoming a better cook by making a gourmet dinner at home once a week
4. Spending more time with your teenager

Shouldn’t your budget and spending reflect those goals? Specifically,

1. You should be reducing your spending on Gas
2. Create a personal budget
3. You should be reducing your Restaurant expenses, but possibly increasing your Grocery expenses
4. Possibly budgeting for regular, even season tickets to an event your teen would actually attend with you

Here’s a simple exercise you can do to synch up your budget plan with your personal goals:

1. Write down your 3-5 most important goals which have some financial implications.
2. Track Spending
3. Determine the types of spending you typically do under each goal.
   Example: your fitness goal might impact your spending on Gas, Auto Maintenance and Sporting Goods.

Mint Tip: You can use Mint.com’s 18 budget categories as a guide.

4. Look back and see if your spending in each category has been moving in the right direction since you set that goal. Perhaps back to January 1 when you made those ambitious New Year’s Resolutions?
5. If you’re on track, congratulations! If you have some room to improve, consider setting a monthly budget just for those categories. Pick a dollar amount which represents lower spending on the activities you’re trying to reduce (e.g. driving) and higher spending on the things you’re trying to do more of (e.g. tickets to sporting events).

Mint Tip: Use “Add a Budget” feature in Mint.com to set up and tweak your monthly spending for each category. You can try out this feature in our Live Demo.

6. After setting a budget, keep an eye on how you’re doing against it … and by association … against the personal goal it represents.

Mint Tip: Mint.com can help you track spending and create a personal budget by sending you a text or email alert if you overspend in any spending category.

By synching up your priorities and goals with your budget, you may discover that it’s now easier to make smart budgeting decisions. What’s more, you should find it easier to resolve potential conflicts between competing demands for your time and money. If we are (in part) what we spend, perhaps you and your money can get into better shape at the same time!

Sign up for Mint.com today and see how better budgeting can simplify your life.

Further Reading on the Topic:

Track Spending

Create a Personal Budget

Budget Planner Software

Make a Budget

Have the holidays left you juggling your finances, scrambling to get out of debt or back on budget? Well, fear not, for the combination of the sub-prime fallout and bank competition has been bad news for bank investors but may be good news for you. Financial institutions are currently offering attractive high-yield savings accounts and low interest rate credit cards to attract more customers and accumulate more of their money. This creates a golden opportunity to reduce the cost of your debt right now, and buys you time to pay down your debt. Now could be a good time to start personal expenses tracking:

1. Transfer any Balances to a Lower Interest Credit Card. Market conditions mean that there are a slew of 0% interest rate credit cards available today. Many cards offer this “teaser” rate for up to 12 months, with no annual fee to worry about. While this does not reduce your overall debt, it does save you from accruing costly interest for the next year, buying you time to pay down your debt. It also has the advantage of consolidating your debt, giving you a single statement to manage. Here are two options to consider:

1. Negotiate a Lower Interest Rate with your Current Lender(s). Ask for a lower interest rate or the best “new customer” deal from your current card providers. Competition for your debt is fierce, and the cost to the bank of losing you is usually more than the expense of reducing your interest rate. For more guidance on the best negotiation tactics, read Three Ways to Ask for More Money.

1. Consider (carefully) leveraging your Home Equity. If you have equity in your home, you might consider using a home equity loan to pay off your credit cards. This is not for everyone. But given the typically lower interest rates offered on these loans, it might be a smart option to reduce your interest costs. Tread carefully here, however, and consult a pro before taking this step.

Once you’ve reduced the cost of your debt to a minimum level, you have to focus on reducing that debt burden. Mint suggests a four step approach:

1. Decide which Debt to Pay Down First. In the ideal world, you ought to pay down the debt with the highest interest rate (a nod to compound interest) first, regardless of balance. But the Snowball Method, popularized by Dave Ramsey, says the opposite and encourages you to payoff lower balances first. Psychologically, this approach makes it easier for you to get some quick wins and possibly gain the motivation to continue paying off the rest of your debt. If you’re feeling overwhelmed, the Snowball Method might be right for you.
2. Set up Automatic Payments. This is a great way to ensure that you consistently pay down debt first, with the remaining money representing your new budget for your day-to-day expenses.
3. Yes, Tighten your Belt. It may sound simple, but until you’re out of debt you should be reducing or eliminating dinners out, travel or even that new gadget you’ve been eyeing. Think of the interest you’re paying now as a recurring expense that increases the overall cost of everything you’re buying. You’ll only be making it worse by continuing to spend more than you earn.
4. Get Better Organized in 2008. Understanding where your money is actually going is perhaps the most important first step to reducing your debt, preceding all the others. We designed Mint.com with the needs of the person striving to reduce or eliminate debt in mind. That’s why we made it easy for you to:
   1. See every transaction across your multiple accounts in one central place
   2. Set up budgets for the couple of categories you’ll want to watch most closely to get back on track
   3. And set up email or text alerts to let you know if your spending is exceeding those targets
   4. Find ways to save on bank interest and fees, as well as typical monthly bills.
   5. Use personal money management software like Mint to help track your spending.

   Sign up today!

And lastly: stay calm and keep your sense of humor. You are not alone in feeling under water. If you need any reassurance, please check out our Holiday Spending Hangover Contest (in preview now until its 1/31 launch). You’ll probably find that the stories submitted there sound familiar to you. Submit your own story and, who knows, you might win $5,000 yourself! That could represent a big step out of debt in 2008.

Is there a debt reduction idea we’ve missed? Please comment to let us know.

Further Reading on the Topic:

Personal Expenses Tracking

Personal Money Management Software

Free Money Manager

Personal financial tracking and tracking finances are two things that we care about here at Mint. Learn more with great financial tracking tips in our blog article index.

It is said that “people never plan to fail; they just fail to plan.” It can also be said that setting a detailed plan for personal financial tracking is far different than merely aspiring for something. Getting out of debt, buying a new home, or creating a work/life balance requires a clear strategy, actionable tasks and deadlines to accomplish well.

Imagine managing your own personal finance as if it was your own business. Like every (successful) company, each has its own business plan that includes specific financial goals and game plan crafted over a period of time. Think of this business as “Me Incorporated,” where the “Me” is your collective net worth (savings, investments, assets), including various departments that have their own budgets and spending patterns. To grow “Me” over time takes a lot of hard work, determination, online personal financial tracking and a process called goal setting.

Here are some guidelines to setup and achieve your goals:

1. Less is more. Setting fewer goals means you’re far more likely to remain focused and accomplish what you’ve set out to do. For example, paying off your car loan and getting your credit card debt may be admirable, but probably not realistic to happen concurrently. Focus on one significant goal at a time, then move onto the next.
2. Be precise. Setting a goal to buy a house in 5 years is less effective than setting a goal to buy a house by June 2011 with $100,000 saved as a down payment. Detailing the steps to get at a measurable target also provides an opportunity to do a reality check with yourself, and to make some hard decisions along the way.
3. Track regularly. Regular check-ins with yourself helps ensure you’re on the right path. You may need to either tweak a certain aspect of your “Me” business, like cutting some expenses from certain “departments,” or to change strategies altogether. Regardless of your choice, through regular check-ins you’re directing your energy and work toward doing that most important thing: moving “Me” in the right direction.
4. Work up to the Big Goals . Know which goals are short-, versus medium- and long-term. In some cases, the short-term goals are needed to achieve a long-term goal. This process of categorization is an important part of managing “your business” comfortably and not feeling overwhelmed when trying to accomplish the usually bigger and longer-term goals.

Whether your goal is big or small, creating that list and checking it twice is especially useful during the Holiday season, when the business of “Me” sees its busiest season.

Example: Establishing and Achieving a Goal

Let’s assume you want to save for a new iPhone by February ‘08. You’ll need $399 for the phone itself, plus for simplicity about $100 per month for the plan. Now let’s assume that your current plan charges $80 per month, which means you’ll need to cut $20 per month to keep your monthly spending even. (One way to gain it back is by selling some devices for which the iPhone replaces, like your iPod. But again, for simplicity, let’s assume you’re wedded to all things Apple.)

Step 1. The Goal. In this case, you want to save $399 in four months, plus the rate plan price difference for, say, four months — so $480 total.

Step 2: The Plan. Identify how much you need to save to reach your goal. Now, my example is simple. You’ve got four months to save $480. Since the goal is very short-term, investing your savings is not going to help you much. So, I’m just saving $120 every month for four months. (Tip: for more complex and longer term goals, use one of the many nifty calculators on the web which accounts for expected rate of return and inflation. Here’s one such calculator for your convenience.)

Step 3. The How. Now that you know how much to save, it’s going to be helpful to review what you’re spending by category with a online personal financial tracking tool like Mint.com to see what can be cut or reduced. Aim for attainable percentage reductions in specific areas, like Dining Out or Shopping, and then set up a budget level and an alert for your target amount. These alerts are displayed on the Overview page, and you can also tell Mint to send them by email or to your mobile phone.

Step 4. Enjoy your new Phone…and the satisfaction of a goal achieved, and debt avoided!

Do you have your own personal method to achieving your financial goals? Please feel free to share!

Having difficulties with your personal financial tracking to reach your financial goals? Sign up for Mint.com today and refresh your finances!

Further Reading on the Topic:

Personal Financial Tracking

Online Personal Financial Tracking

Tracking Finances