Personal finance software goes a long way to helping us manage money better. One of the most popular personal finance apps, Mint, is especially useful for monitoring every transaction that occurs across all the accounts you own, in addition to helping you create and track budgets in different spending categories. With Mint, you can easily keep an eye on how much you spend every month on, say, groceries, coffee shops, and home improvement. But everyone has some unusual spending from time to time, and sometimes that unusual spending is even planned in advance. The question is, how do you deal with these fiscal deviations in Mint?
Here’s a real-world example from a reader who wrote to me recently. He told me, “My biggest hang-up with Mint is that it seems to think every month is going to be perfect. Anyone who’s made a budget knows this is never the case. For example, I have a ‘Misc.’ budget for one-off spending set at $100 per month. We just moved, and this month I had to buy several items that cost me almost $500. In a perfect world, I could simply go without spending anything on the ‘Misc.’ budget for five months, but in my experience, there is something that always comes up before I can ‘repay’ myself. How do I account for spending without telling Mint to ignore these purchases?”
The Psychological Power of the Red Bar
When you exceed a budget you’ve set in Mint, your budget bar turns red. There’s some psychological power here. Red means you’re in trouble. Red means you did something wrong. But that’s not always the case.
There are a few ways to set up your budgets to accommodate special circumstances, so you don’t see that evil red bar for spending that you planned. But there’s also an option to leave it and let it stare you in the face. That’s the first option I want to discuss.
Option 1: Accept the Red
In some sense, the point of the budget is to be able to watch and see when you blow your spending from time to time, even if it’s planned. Let’s say I spend $10,000 on a bathroom renovation. My Home budget for that month is destroyed, a huge red bar on the bar graph. But so what? I overspent. I knew about it. I planned it. It’s not like I’m caught off guard about it.
Okay, a $10,000 bathroom makeover is an extreme example. More likely, for a purchase that size, you’d create a goal for it first to make sure you had the money in advance.
A more realistic scenario, which actually just happened to me, is that I spend $180 on a rug. I classified this as Home spending, so it should show up as coming out of my Home budget. I blew my budget for the month, but not too badly. But as time goes on, I want to be able to look back and see that I blew my budget and by how much. When I look back on my month-to-month history of expenses, I want to know how often I blow that budget and what I’m spending it on. Maybe my Home budget needs an increase. Being able to see when and how often and by how much I go over budget gives me a realistic picture of what I’m doing with my money.
Option 2: Hide the Spending
Another option is to hide certain spending from your budget. In Mint, the hiding functionality is in the settings.
Hiding makes it so your budgets ignore spending from a particular account. Let’s say I have a debit card linked to a savings account that is for special purchases only. If I hide that debit card account from my budgets and trends, any spending I do with it won’t show up against my budget.
Option 3: Rollover
I reached out to Mint for more advice about setting up budgets to handle real-life spending. Kevin Kirn, head of product at Mint, sent a reply and brought up a very simple solution: Enable the rollover option on the budget.
When you set a budget to rollover, any remaining money in the budget that you didn’t spend for the month rolls over into next month. Let’s say I have a coffee shop budget of $35. In August, I spend only $30 at coffee shops. In September, my coffee shop budget will be $40.
Rollover budgets, the Mint rep told me, can help motivate someone to spend less on certain items in anticipation of a bigger purchase later.
To enable the rollover feature in Mint, go to your budgets and click to edit any one of them. In the editing box, you’ll see an option to “start each month with the previous month’s leftover amount.” Tick that box, and you now have a rollover budget.
Option 4: Create a New Category
Kirn considered my idea that certain kinds of planned spending, like a $10,000 bathroom renovation, might be better as a goal. But he also thought about my $180 rug. That level of purchase isn’t befitting of a goal, even though the general concept might be the same. I knew I was going to buy a rug, and I had loosely set a $200 budget for it.
Instead of using a goal, Kirn told me, you could create a category under an existing category just for this big purchase, and set a budget for it separately.
Here’s how to do it: Go to Budgets and choose Create a Budget. Then, when asked for the category, choose to see them all. Select Home (or whatever the parent category would be), and to the right create a new (child) category for the purchase. In my case, I could create a new category called Living Room Rug or Furnishing and nest it under the Home category. Then I’d set a $200 one-time budget for it. Be sure to choose the month in which this one-time budget is relevant.
Staying On Course
Having budgets in Mint or other personal finance apps helps you stick to your financial goals by helping you keep an eye on how much you’re spending. The Mint mobile app is especially handy when you’re actually out and about shopping, because you can look at your budgets and see how much you can or should spend before making purchase without crunching numbers ahead of time. That reason is part of what makes Mint one of the best mobile finance apps.