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

Personal finance is something that we care about here at Mint. Learn more with great personal finance tips in our blog article index.

We came across this blog post by David at MyTwoDollars right about the time we were launching our new SpendSpace feature last month. SpendSpace allows you to compare your spending, in any category, to city, state and national averages. Check it out (it’s located at the bottom of your Spending Trends page)… but be forewarned that it’s highly addictive.

As we were designing this feature, we gave a lot of thought to whether or not we should all be apsiring to “keep up with the Joneses”. David’s take on this was insightful, and we wanted to share it with you.

Everyone has heard the expression “Keeping up with the Joneses”. In fact, I have used it on MyTwoDollars quite a few times. But I started giving it some thought and I started to realize that most of us, on purpose or on accident, try to keep up with the Joneses we see on television and in magazines, and not the real Joneses that are living next door to us.

The reason I think that is because if we truly had an inside look into our neighbors affairs, we would see that they are probably just like us… they probably own the same kind of cars, the same kind of appliances, they have done the same kind of remodeling that we would do. After all, they live in our neighborhood, so they are probably very similar to us. So when we feel like we don’t have as much as our neighbors or we need newer stuff to feel more accepted by society, I think we are judging our lives by the fake ones we see on our favorite television shows and not by the reality surrounding us.

Look around your block or neighborhood; is everyone else driving a BMW while you are driving a Toyota Yaris? Does everyone else have a much nicer house than you do? Do they get to take more vacations than you? Chances are, they aren’t and they don’t. They are making things work just like you are, and some of them might have a few more things than you do, and some of them might not. But really, they are probably very similar.

I think this is important to keep in mind as we are inundated with advertising proclaiming to deliver the good life if only we bought that new Mercedes, took this new drug, bought that new house in the hills. The people on TV look and act different than we do because they are different than we are…they are actors, on a television show or in an ad, trying to either entertain you and/or sell you something. Truthfully we don’t need a new washer and dryer if our existing one still works fine. But I guarantee they can make you think you need a new one because of how white their shirts are! The Joneses you might be trying to keep up with are not real Joneses, because those real Joneses are just like you.

Just something to give some thought to before you feel like people have better stuff than you, more stuff than you, are more successful than you. Take a minute to check out your true surroundings, and not the fake ones created on television. I think you will find that most everyone around is just like you, and there is no one you need to be keeping up with. It’s never a good idea to try to keep up with people anyway; it’s much more important to carve your own way, make up your own mind as to what is important in life and not let others dictate what you should or should not be doing. But it’s especially important to not let advertising or television fool you into a false sense of what you aren’t or what you should be.

You can see more of David’s writing on personal finance topics on his blog at MyTwoDollars.com.

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

Financial planing is something that we care about here at Mint. Learn more with great financial planning tips in our blog article index.

Last week, we published Aaron Patzer’s Three Principles of Personal Finance in a three-part series. The full article is now available on the Mint Content Network, which you can read here.
We welcome your comments. And if you found the article useful, we hope you’ll forward, Digg, or share the article so others get the message: it can be simple to manage your money well and financial planning.

1. Spend less than you earn.
2. Make your money work for you.
3. Prepare for the unexpected.

Now, we’ve reduced personal finance to three simple principles, and no more than a dozen action items. Can’t be any simpler, right? Wrong! We’ve built mint.com to be a great place to put these principles to work – today! Are you surprised? For example:

1. Use Mint for tracking finances…and see where your money goes

The first step to financial success is to know where you stand. You need a complete picture of how much you have, how much you owe, and where it’s all going. With financial planner software like Mint, you get all of that – for free, and with less than five minutes of setup.

2. Pay off your credit cards (highest rate first)

We’ve already shown you that a $5,000 credit card bill paid off at $100 a month will take nine years and $5,100 in additional interest charges. If you’re paying 20% interest on credit card debt, action item number one is to pay it off before you do anything else. There’s no point investing your money at a 10-15% gain, when it could be used to avoid a 20% loss.

3. Setup automatic investments

The key to wealth is compound interest. Invest just $200 every month when you’re 25 and at a 10% return, you’ll have $1.2m by 65. You’ll also have savings in case of emergency, money for your children’s college, and the ability to borrow from your investments for a down-payment on a house.

Not sure you can find $200 a month? Mint shows the average user over $1,800 in annual savings – that’s $150 a month right there. You’ll be well on your way.

Further Reading on the Topic:

financial planning software

online financial planning

personal financial tracking

tracking finances