With goal-based budgeting you can easily see how changes in your income and spending impact your financial goals. To show this the budget is broken into three sections:
- Spending and Debt
- Savings and Investment
Changes in the spending column change the amount that is carried over to your savings column. The amounts you enter in the savings and investment categories will update the associated goals in the goal column.
When budgeting you want to make left to budget amount equal exactly $0.
Your goals are shown on the right side of your budget. Each has a description, date, and an amount with the date and/or amount changing based on the goal type and the amounts that you are budgeting towards the goals.
Each goal has a color assigned to it which you will also see highlighting the budget category, or categories, that apply to it.
Creating a new goal
You can add as many goals as you like by clicking on the “New Goal” button at the top of the screen.
There are a handful of default goal options for the common financial goals that people have as well as a custom goal option.
There are two goal types you can use:
Use the savings goal type for any short-term goals that you may have and that you are putting money aside in a checking account, savings account, CD, or another very-low interest account. These are goals where you cannot afford to not have the full amount on hand (i.e. when there is a down market) when you need it.
Longer-term goals, where your time-horizon is long-enough to overcome a possible recession, are goals you typically invest for. College and retirement being the two biggest example. Pick the investing goal option for these and enter your projected return on the money that you invest each month.
This is the amount that you wish to reach via either your saving or your investing.
This is the you wish to have the goal amount saved by.