Budgeting With Moneydance

I recently switched from Quicken 2009 to Moneydance 2010 back in February of this year.  Since then I’ve been on sort of a quest to fix our finances.  Part of that quest has been to set a budget and stick to it.  I toyed with budgeting in Quicken a few years back but back then I was trying to budget each subcategory and, since I have so many, I found that difficult and ultimately useless.

So I thought I’d give Moneydance’s budgeting features a go and see what happened.  First though a bit of a disclaimer: this isn’t intended to be a tutorial per se; rather this is an account of how I use the software.  That said, if you find that this information is helpful then all the better.  Also, this article assumes that you have a working knowledge of the software; for example, you have one or more accounts set up and have entered transactions that are assigned to one or more categories.  Hopefully you also have at least a few subcategories set up too.  It’s also a good idea to first read the instructions for the budgeting component of Moneydance, located here.

Creating A Budget

To create a budget you first choose “Budget Manager” from the “Tools” menu.  Then click the “New” button.  You’ll see this window:

Since I have a lot of categories, I let Moneydance create my budget for me by clicking the “Calculate” button.  This window will appear:

In this example I’ll set the start date of the budget to 1/1/2011 and choose the last 12 months as my example date range.  I set my budgets up monthly, for the most part, so I chose that option.  After all that, click “OK”.  Moneydance will fill in the amounts for you, for all categories and their subcategories that had income or expense in the past 12 months.

Categories and Subcategories

The first thing I did with my auto-generated budget was to remove virtually all the child categories (more on this below).  This is accomplished by clicking the minus sign at the bottom left of the window.

To add categories to the budget, just click the plus sign.  A new line will appear at the bottom of the list (you’ll probably have to scroll to the bottom of the screen to see it).

This part was very important to me.  I use a lot of subcategories.  For example, instead of a single Tax category, I’ll create multiple subcategories beneath it.  For example, Tax:Brian, Tax:Traci, Tax:Personal Propery.  Then, under that, more: Tax:Brian:Federal and Tax:Brian:State, and Tax:Brian:Social Security, and so on.  I also do this for other categories, such as Utilities:Telephone:Taxes and Fees.  Same with Entertainment (Entertainment:Concerts, Entertainment:Parties, Entertainment:Bars, etc.)  I do this because I want to be able to track these expenses down to a very detailed level.  I want to know exactly how much my phone provider is charging me plus whatever fees I’m incurring on top of it.  This could help me to make a decision down the road to cancel my phone service if it’s getting too expensive.

This detail is great for tracking expenses because I can always choose to sum up my subcategories if necessary. For budgeting, however, this low level of detail mostly sucks.  For regular expenses, like utilities and taxes, sure, I could make it work.  But for irregular stuff, like entertainment, clothing or children, I really just want to budget at the parent category.  I can’t really know how much I’ll spend on the enterainment subcategories of movies vs. music vs. books, but I want to make sure that I don’t spend more than a certain amount on all of it combined.  This allows me to set an overall limit that’s reasonable and accurate while providing flexibility to spend it differently each month.

Fortunately Moneydance will allow this.  If you set, for example, a $100 limit on Entertainment, then the software will sum up all the expenses in both the category and any subcategories and then compare them to your budgeted amount.

For me, however, I still sometimes want to budget a subcategory.  For example, I don’t want to budget for music, books, movies, or video games under the Entertainment category.  I do, however, want to budget for any concerts we might attend or for amusement park season passes.  These are both under my Entertainment category, but those expenses are sporadic and typically a little higher than normal month-to-month expenses.

Fortunately, Moneydance allows for this too.  I can create a budget line item for Entertainment, then create another one for Entertainment:Concerts, and another for Entertainment:Amusement Parks.  Then Moneydance will sum up everything under Entertainment except Concerts and Amusement Parks, and will compare it to my actual spending against the Entertainment category.  Any spending on amusement parks or concerts is summed up separately and and compared against actual spending on concerts or amusement parks.

My general rule of thumb has been to budget virtually all of my categories only at a parent category level only.  Then I choose certain subcategories that I really want to budget separately and I add them to the budget.  This amounts to only a handful of subcategories.

Budget Line Items

In the above image you’ll notice a start date and an end date below the budget name.  This defaulted to the Jan 1 and Dec 31 of the current year.  Below that is the Amount field for your actual budgeted amount, the category name you’re budgeting, the interval, and start and end dates.

Most of my intervals are set to monthly.  For things like paychecks however, I set them to bi-weekly.  That takes care of the extra paychecks I get two months out of every year.  Some things, like Dining, I actually budget at a weekly level.  Either way, if you set up your budget like this it can all be shown at a monthly level on the reports.  There are both prorated and non-prorated intervals.  What this means is that if you set up a monthly interval of $400 prorated, Moneydance will prorate that out to each day of that month and will show your spending against the prorated amount,depending on how far you are through the month.  If you choose not prorated, then it assumes the expense will occur in one big bang and will compare your spending only to the total amount.

My general rule is that expenditures like dining, entertainment, and clothing are all prorated.  They’re sporadic and incremental.  My car payment or insurance payment, however, is one lump sum, once per month.  I set those to be not prorated because it will only be paid in full or not paid in full at all.  I never partially pay these bills.  In this case prorating doesn’t buy me anything useful.

Lastly you’ll see a start date and an end date for each budget line.  Since a budget can be used year after year (it starts over again at the beginning of the year) then just I just leave the end dates open for any expense that’s going to continue.  If, however, an expense (or income) is going to go away before the end of the year, then I set the ending date appropriately.

Sometimes you  know that you’re going to have additional expenses in a given month.  For example, property taxes are paid every month for a mortgage. Additional property tax on automobiles is due in December of the year (at least in Missouri).  So let’s say you pay $50 per month for property taxes in your house payment, so you set up a monthly budget expense line for $50 to property tax with a start date of 1/1/2010 and a blank end date.  To account for the additional $100 expense in December, I’d click the plus sign at the bottom left and create a new, additional budget line item for property taxes.  Now we have two budget lines, one for the monthly recurring expense, and one for the single month expense in December, and both for property tax.  You can set the December auto property tax expenses date range to 12/1/2010 and the date blank.  Now Moneydance will budget $50 for January through November, and will sum both lines together to total $150 in December.

Budget For The Year, Then Tweak It Each Month

I know there’s no way I’m going to be able to budget for everything for the entire year at the beginning of the year.  So I create monthly recurring budget line items for the expenses and income I can reasonably assume I’m going to have each month for the whole year.  Then, at the beginning of each month as I go through the year, my wife and I sit down and we put together a budget for that month.  I add new budget line items for expenses we’re only going to incur that month or for expenses above and beyond an existing monthly budgeted category.  I still can’t know everything the month is going to bring, but I can get a lot closer to reality by budgeting incrementally in this fashion.

Reporting

Moneydance comes with a budget report to compare your actual spending to your budgeted amounts so you can track how well you’re following your budget.  Choose “Graphs and Reports” from the “Tools” menu, then choose “Budget” from the report list.  You’ll see this window:

Choose your budget (I named mine “My Budget”; original, I know) then choose the month to compare. I usually like to run three active reports; one for the current month, one for the prior month, and then one for the current year to date.  Current month provides me with a report of how I’m currently doing.  Last month tells me how I most recently did at a monthly level, and year to date will allow all the noise to shake out and tell me if I’m staying within my budget over the whole year

I also create a report to handle any prior years.  For example, to create a 2010 budget report, I’d manually select 1/1/2010 through 12/31/2010 as my date range, them memorize the report, adding 2010 to the report name.  Then, when 2012 rolls around, I’ll do the same thing again for 2011.  This provides me the ability to view how well I stuck to my budgets in prior years compared to the current year.

Once you choose an interval of actual spending to compare to click the “Generate” button.

Here’s an example of my current month to date, compared against my 2010 budget:

What’s great is you can memorize these reports and run them with a single click from the Moneydance home page.

You can also add graphical budget bars to your Moneydance home page.  Go to the program preferences window and click the “Home Page” button at the top right.  Add “Budget Bars” to your homepage and click OK.  This will show you pill-like graphs for each of your budgeted categories and subcategories.  You can add or remove any you want or don’t want to see.  In the case of subcategories you can choose to show the full subcategory name (such as Entertainment:Concerts) or just the category name by itself (Concerts).  This is done by clicking the “Settings” button on the budget bar section of the home page.  Right-clicking on a budget bar will allow you to move it up or down within the list.  I place budget bars for categories we tend to overspend on at the top so that they’re clearly visible when I start the program.

The budget bar will be green while you are under your set spending limit for a given category.  When you start getting close it turns yellow.  Once you’ve gone over it turns red, and places a vertical bar where your limit was.  These thresholds can be modified by clicking the “Settings” button (see image below) but I found the default setting to be fine.  The default view compares the current month’s actual income/expense against the current month of the budget.  Any categories budgeted within the active budget but have start/end dates falling outside the current date range will show “Out of date”.  Any categories included in the home page view that do not have an amount set for the active budget show “Not in budget”.

Hovering over the budget bar shows the percentage of the budgeted amount you’ve spent.  Hovering over the dollar amount shows the breakdown of spending, by rolled up subcategory.

It’s important to remember to ensure that the “Roll up child categories” check box is checked to ensure the budgets bars sum up your budgeted subcategories, otherwise budgeting in the fashion described here won’t work properly.

Now I didn’t cover every single feature available for bugeting in Moneydance.  The link I provided at the beginning of this article will provide more detailed insight into all the functionality.  My intention was mainly to show how I use the software for my own bugeting purposes.

There are also other personal finance applications available that focus on budgeting.  Moneywell (for the Mac) and YNAB (You Need A Budget) both focus very squarely on budgeting.  I’ve never used YNAB but my experience with Moneywell was that the software focused less on transation capturing and more on budgeting.  My dataset of ten years proved to be too much for the software to handle, at least the version I tested back in February 2010.  There very well might be other applications that do bugeting better than Moneydance; however, my point here is that no other software package I’ve tested can match the full feature set of Moneydance and the budgeting feature within Moneydance is actually very useful once you spend some time getting to know it.

Hopefully this article will help others looking to tap into Moneydance’s budgeting capabilities.  So far it’s proven to be very useful to me and is another reason why I’m very happy with Moneydance.

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2 Replies to “Budgeting With Moneydance”

  1. Hi Brian: This is a well written post. I’m glad Moneydance is working well for you, it’s a quality app.

    We have improved the performance of MoneyWell with the 1.6.6 release and our 2.0 release planned for early 2011 is a factor of 10 faster in early testing. Even if you aren’t interested in switching, I’d love to hear your MoneyWell feedback after we release 2.0.

    1. Hi Kevin,

      Thanks for taking the time to post. Back in February of this year, when I was evaluating software to replace Quicken, MoneyWell (along with iBank, GNU Cash, and Moneydance) was one of the software packages I tested (http://musingpanda.com/2010/02/08/moneydance/). This was, of course, almost a year ago, and from your comments it appears you guys have made significant improvements to the software. I liked it even then but unfortunately it was just too slow (I had imported 10 years of data) and the QIF import didn’t go so well.

      I should also point out here that for those interested in envelope budgeting, Moneydance does not currently provide this functionality out of the box, whereas MoneyWell does (as I understand it). My personal requirements don’t call for envelope budgeting but there are plenty of others’ that do (which is actually why I mentioned MoneyWell).

      Good luck on your 2.0 release; I’ll try to grab a copy when it comes out and throw at it my (now) 11 years of transactions!

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