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The underlying principle of budgeting is knowing where your money is needed. Once you know that, you can allocate the appropriate funds to ensure that you will be able to meet all your financial obligations.

The way most people tell where money is needed is when a bill comes due. You need this amount now to pay this bill. The problem with that method is that it's reactive to the situation rather than pro-active. Wouldn't it be nice to know that when a bill is due you have the money to pay it? You do this with that planning thing we have been talking about.

Once you have created your envelopes and allocated your funds to those envelopes, you're not yet done with budgeting. It's an ongoing process. OK, so how does Budget help you to keep refining your budget and hopefully get ahead of things rather than always being in debt?

Budget has some very powerful tools that show you where and how you have been spending your money. As was stated earlier, the best is the main window that shows you all your accounts and envelopes. Anything showing in red? If so, you need to refine the allocations to that envelope. How do you do that? First look at your other envelopes. See if any have a balance that is greater than what you have been spending for that envelope. You can use Budget's statistics windows to help you. They show you how you are doing with your expenses and deposits in a table form or it can also graph the information. If you see that over the past few months your percentages have been less than 100% then you have more money going into the envelope than you need. This envelope is a prime candidate for reducing the allocations and using the "extra" money for the envelopes that are in the red.

As you continue to refine your envelopes you will find that you're spending more money on some than you want. This is a good envelope to "tighten the belt" on and reduce the allocations. This makes more available for those other difficult envelopes.

If you are paid either weekly or biweekly, remember those extra pays we mentioned when talking about monthly income? If you have been using the 2 or 4 pays each month as your total monthly income those extra pays can be allocated for special items. If you have a bill that comes due annually you can use these extra pays to pay those bills. Or, you can use these as a sort of savings account. Since you have budgeted your money without them they are now truly extra pays.

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