The 4 Best Ways to Utilize Budget Software

The best use of budget software is for bookkeeping, reports, financial planning and tax planning. Most programs include extra features that you'll never need; focus on what you do need to use to manage your budget, and you'll improve your finances. Here are the 4 best ways to use budget software:

1. Keep Your Books

Don't create a budget in the program and then think you're done. It's not enough to know what your budget looks like, you have to work with it. One of the best ways to use budget software is to keep track of your income and expenses. Set aside time once a week or once every two weeks to enter your expenses and income in your budget software.

Make sure that your checking and savings accounts are balanced, and that every penny is accounted for. Some people prefer to do it the same day they earned or spent money. Whichever timing you choose, it's important to remain consistent until it becomes habitual. You can generate many important financial reports with the data you enter.

2. Generate Reports, Charts and Graphs

It takes a certain level of accounting skill and experience to create a financial report based on financial data. The best budget software will generate reports for you based on your bookkeeping. Simply select what report, chart or graph you want, and with one click, it will show you what you want to see. Some reports to generate are:

  • Budget report
  • Profit & Loss
  • Specific income and expense categories
  • Net worth

Knowing how to analyze these reports will help you make the right decisions on a monthly basis. Some budget software will offer analysis as well.

3. Financial Planning

The reason why you create and follow a budget in the first place is to plan your finances. Your budget should not reflect your spending habits, as much as outline your plan for giving more, making more and saving more. A deluxe or advanced version of a basic budget software will have what you need for financial planning. For example, some software programs will ask lifestyle questions and recommend financial products, such as life insurance, based on your answers. The best budget software will go one step further and offer a web feature for you to get quotes instantly. It may also offer suggestions and flag areas of your finances that you should improve if you want to meet your goals.

4. Tax Planning

Knowing how much you'll owe in taxes before you file is important to avoid a financial disaster. This is easy to do if you have a paycheck and a resulting W-2, but it's sometimes more complicated if you're self-employed. The best use of budget software is to use it to help you estimate how much you'll owe. This may require buying an expanded package, instead of a basic one, but it's worth the investment.

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