Principles of Budgets

We built Budgets around some simple and powerful concepts. In order to have the best experience with Budgets, we recommend following these principles as you build and use your budget.

1. Make your dollars work for you by giving them jobs

Imagine that each dollar you own is an employee, and they all work for you. You're the boss of your money, so you get to decide what you want your employees to work on, whether that's buying groceries, paying off debt, or saving for the future. When all of your dollars have jobs, answering the question "can I afford this?" becomes super simple to answer. By removing this ambiguity, we've found that we're less stressed and make better financial choices. And remember, you're the boss of your money, so if you need to move some money from one job to another, no problem.

This concept is called "zero-based budgeting". And just so you know, we didn't invent this concept, but we love it all the same. To learn more about zero-based budgeting, check out this blog post Derek wrote about it.

2. Sort Every Transaction

Budgets has you sort each credit card or bank transaction into the correct category. There's two reasons we do this:

  • You may have heard of the expression "Cash is King", but in reality, everyday cash becomes more and more obsolete. In fact, a 2020 statistic found that only 13% of Americans always have cash on hand. Credit and debit cards are clearly a more convenient option for payment. As convenient as credit and debit cards are though, it's hard to know how much money we're actually spending. The same swipe buys a 99c chocolate bar and a $30,000 boat. You don't feel the money leaving you the same way as if you were spending cash. Then there are all the subscription services that we love: Netflix, Hulu, Spotify, Amazon Prime... which are all great, but you don't even have to swipe a card to spend money! We want to make sure you are never caught off guard by a transaction, and you have that cash-like experience of seeing every time money leaves your hands.
  • You may have used other financial apps like Mint that automatically sort every transaction for you. I don't know how your experience was, but for us they frequently sorted those transactions incorrectly. We tried to build a smarter solution, but the truth is it's a really tough technical problem. The same "Amazon" transaction could be a gift, home maintenance supplies, a new iPad, clothing, groceries, or a combination of all 5! It's just really difficult to get that correct every time, and having you digging through your transactions list every few weeks to find the incorrectly sorted transaction sounds like no fun.

To make the sorting process easier and less time consuming, Budgets will give a suggested category for each transaction.

3. Stay in the green!

Budgets will help you track your spending using the green circle to the left of each category. If you overspend in a category, the circle will turn red to warn you that the category is in debt. Overspending happens, there's no shame in that, but we don't want to let the category stay in debt. When a category turns red, you can transfer money from another category to cover it. When you keep all of your categories "in the green", you can be sure that you're not actually going into debt!

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