PearBudget: An Effective Way to Dip Your Toes into Budgeting

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pearbudgetAs I mentioned before, when I first began my financial turnaround, I constructed a tight budget and stuck to it like glue for the first few months. That tight budget was invaluable – it taught me how to ride the proverbial bicycle that is personal finance management.

One of the biggest tools I used during this process was PearBudget, which was a free Microsoft Excel spreadsheet that helped automate many of the basic tasks of developing a budget. That spreadsheet is still available for free online – it requires Microsoft Excel, but it’s still one heck of a useful tool. While I didn’t end up using that PearBudget sheet for my own budget (I used it to evaluate a lot of ideas, but I had a lot of fun hacking Excel to do things exactly how I visualized in my head – not really in a way that makes sense to anyone else), I used it a ton in figuring out my own ideas and assembling them.

Not too long ago, I discovered that the people who developed PearBudget were converting it into a web application – and I was immediately apprehensive. I am very concerned about personal information security, especially when it comes to personal finance and the modern web. Here’s what I wrote on that issue a while back when reviewing other online personal finance tools:

The problem is something I like to call “information creep.” When you use these tools, you expose your personal information to them. With Mint, for example, you transmit your account information through mint.com and then through Yodlee to aggregate your info. Intuit (the Quicken Online folks) communicates directly with your account providers to scoop in information. Wesabe is perhaps the least onerous – you don’t directly submit account information to them, ever – but their tool isn’t as robust because of this limitation and they still do create a history of your spending.

In all three cases, you’re building up a substantial data set about yourself. With Quicken Online, they don’t milk the data (at least not on the surface) but you are charged a fee for their service. With Mint, it’s free – but they make their cash by showing you targeted ads based on that data. Again, Wesabe has the best method at the moment – they’re currently handling everything via venture capital money and plan a “Wesabe Pro” to generate revenue.

If that doesn’t concern you, consider this: the more information you have out there about yourself, the more likely it is that some sort of identity theft will happen no matter how secure individual sites are. It only takes one little accident for your data to get into the wrong hands – and even the most secure of places can have a little flaw. The more places you put your data, the more “little flaws” you’re exposed to.

I had zero interest in using PearBudget Online unless there was a compelling solution to this issue – and their solution is actually pretty good. Basically, it doesn’t want any of your account information. None. Instead, you just enter your expenses and income as raw numbers and add them into the categories you’ve defined yourself. Since your account info there is essentially anonymous and there’s no association to your real financial data, the privacy concern is almost nonexistent.

Even better, PearBudget distinguishes itself from other such online tools by not including ads in the service – Mint, for example, uses targeted advertising to cover the bills. PearBudget has a 30 day free trial, then charges $3 a month for the service – a nominal fee if you find it useful.

So how does it work?

A Brief Walkthrough of PearBudget Online
When you first visit PearBudget Online, you’re guided through a wizard that lets you define the categories in your budget (they offer a bunch of suggestions and groupings, but let you add your own as you want). You then identify them as regular expenses (ones you have every month) or irregular ones (like property taxes), identify how much you spend monthly on the regular expenses and annually on the irregular ones, enter how much income you get (you can identify as many income sources as you want), and you’re done! It generates a spending plan for you. Seriously, try it out – it only takes a few minutes and it’s really slick. To try it out, I entered a bunch of dummy data and it took me about three minutes – but when I saw how slick and useful it was, I wanted to do it with real data – and so I did.

Once you’ve set up your categories, you basically have three modes: plan (where you look at your spending plan and possibly add new spending categories as you see fit), enter (where you enter receipts as you spend money throughout the month), and review (where you look over how your spending matches your budget).

I was genuinely impressed with how slick the software is. For most people trying to figure out a budget, it’s a great way to dig in and get started very quickly and effortlessly. It’s very flexible – you can define your own categories however you like, which is something that I think is essential when budgeting in the real world, as everyone groups their spending in different ways. PearBudget lets you group it pretty much however you want.

My Thoughts
First, the bad. I really only have one significant criticism when it comes to PearBudget Online. First, it does cost $3 a month after the 30 day trial. While that’s a nominal fee (in my eyes), some people will be hesitant to dive in and really try the tool because if they get involved with the tool, that $3 a month effectively becomes another bill. One option the creators might want to consider is to have a “free” account that displays ads or a paid account that does not. I, for one, would pay the $3 not to have the ads. Alternately, a person could just do the whole thing offline and use the old PearBudget spreadsheet for free.

Aside from that, the tool is impressive to use and handles my security concerns better than any online tool I’ve seen. If you’re trying to budget, I heartily recommend giving PearBudget Online a try. If you’re concerned about the $3 a month fee (and for people on tight budgets, this can be an issue), give the old PearBudget spreadsheet a whirl – it helped me out once upon a time.

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27 thoughts on “PearBudget: An Effective Way to Dip Your Toes into Budgeting

  1. For anyone who isn’t already in the habit of doing a monthly cash flow plan, I strongly recommend starting out writing a budget ON PAPER.

    It is a lot more real and you’re more likely to stick to it to develop the habit if you put some work into it.

    Dave Ramsey makes his budgeting forms available on his web site. I also wrote a guest post on Get Rich Slowly about getting started with these forms.

    http://www.daveramsey.com/fpu/home/?FuseAction=dspContent&intContentID=3006

    Again, PearBudget and fancy Excel spreadsheets are great if you’re already in the habit. So get in the habit. Start on paper and don’t delay!

  2. I have been using the PearBudget spreadsheet this year and I am a big fan. I will be giving the online tool a try next year; I like what I hear.

  3. How does it differ from Microsoft Money or Quicken or whatever? I know that in earlier versions of the programs, you did not have to give the programs online access, you could simply enter amounts and categories and see where your money was going. I still use Microsoft Money for these purposes.

  4. I use Quicken and find it pretty good. It is probably a little more difficult to learn, but it handles automatic updates and investments, and allows for a lot of customization, including budgets. If you can find it for $40 or so and it lasts 4 years, it is much cheaper solution to these monthly things.

  5. “How does it differ from Microsoft Money or Quicken or whatever? I know that in earlier versions of the programs, you did not have to give the programs online access, you could simply enter amounts and categories and see where your money was going. I still use Microsoft Money for these purposes.”

    It’s less complex. The spreadsheet version is completely free and doesn’t require a software install. The web version works on any computer you go to. It protects your privacy better than the automatic account updates that Money and Quicken do. Those are the big differences.

  6. I’m a big fan of the original spreadsheet-based PearBudget. It works with Open Office, which is absolutely free, in addition to Excel.

  7. I have been using YNAB (You Need a Budget) for 8 months and it is the first one that has managed to help me keep a budget. From the description, it sounds rather similar to PearBudget (I think I downloaded the excel version a while back), except you pay a one-time fee (around $20-$40, depending on the version). While I appreciate the freeares that you are able to download, I thought perhaps if I shelled out some money I’d actually stick to it (slippery, I know…).

    The truth is I have been at it for all these 8 months and would recommend anyone who’s look for a budgeting aid/solution. While the initial payment might hold some back, do know that the people at ynab continue to update the software, and those who purchased it would get free upgrades when it is available. The website (www.ynab.com) would explain much better what the ynab philosophy is. I recommend that you give it a read. :)

  8. I’ve been using the pearbudget spreadsheet for a few years now, and switched to the web version several months ago. It definitely helped me to start keeping everything in order and getting it together financially.

  9. I use a home grown spreadsheet (actually google docs so it is accessable everywhere), but the idea is similar to pear budget.

    I’m one of those who wouldn’t pay $3/mo for a budget. Sure it is a nominal fee, but… I don’t know, i just can’t do it!

  10. I hate this recurring-charges creep that goes on with so many things. All of them are “just” a few bucks a month, but they add up. $3 a month is $36 a year. You’d need $1200 stashed in the bank for a year, at current ING Direct rates of 3%, to earn $36 interest — more if you factor taxes in. I’m sticking with “The Budget Kit,” which I got unused on Half.com for $4.

  11. I just started using the old pearbudget spreadsheet in excel, I think it’s great for my purposes.

    It’s funny I cringe at spending $3 a month for the online version but don’t think anything of handing over $3 for a coffee every morning!

    Mind you, that is US$3 for pearbudget which ends up being AU$3.02 on today’s exchange! Even more shocking.

  12. Interesting. I did a similar budget-building spreadsheet, but the one I did takes a slightly different approach and computes the amount of money you should spend weekly while putting aside money for other expenses, including the “implicit” spending you do simply by owning things that require replacement. It worked well for me, and it’s available free: Within Your Means. It’s an Excel spreadsheet that you just download and use. So far, more than 16,000 downloads.

  13. After reading this yesterday I decided to try the 30 day free trial of Pear Budget, and I love it so far. I’ve tried to use Quicken and Microsoft Money before, but found them both to be too complicated to deal with. I love that with Pear Budget I can check on it and update it from any computer, whether I’m at home or the office.

  14. Does anyone use paper and pencil anymore?
    While I know it’s not very modern and new, I used to use (especially in our early married years) a blue budget book that was about $3 at any office supply store. In it, I would write down all income and outflo on a daily basis.
    While I know that there are lots of programs like this on the internet, I’d be really leery of inputing all that info out there.
    My sense is that it’s like the cash vs credit issue. Pulling out $25 to pay for something in cash can feel painful, but zipping my credit card thru the machine is really easy. I think it’s kinda the same online financial maintainence. If I have to go to the “bother” of finding a pencil and writing down all my financial bits, it means a bit more.
    But I’m a bit older than most of your readers, I suspect.

  15. Keep in mind, Mint.com is anonymous, signup (https://wwws.mint.com/login.event?task=S) never asks for your name, address, SSN, or anything personally identifying.

    Mint.com does know all about your finances. And we do use that information – to help you find a better rate on your credit card, more interest on your savings account, and lower prices on the things you buy most. In fact, the only “ads” you see on Mint.com are ones calculated to save you at least $50.

    However, we really don’t know anything about you, so the risk of identity theft on Mint.com is much lower even than on an ecommerce site where you enter name, address, credit card number, etc.

    Aaron Patzer
    Founder & CEO, Mint.com

  16. I signed up for mint.com, and while it was impressive, I was extremely disappointed that I couldn’t customize my own categories. There isn’t even a category for loans of any kind, which is a huge part of my budgeting. That was enough to make me not want to use it, at least until there are more category options or they are customizable.

  17. We started out doing our budget with pencil and paper, then graduated to using a very simple self-created Excel document. Now we use both the Excel document and the non-online version of Pear Budget – we started using it about 2 years ago. I I especially love how at the end of the year, you can track how much you spent through the year in each category. It’s fascinating, and sometimes horrifying.

    One of the few drawbacks of PearBudget is it doesn’t have a lot of flexibility (I guess unless you want to dissect the program) in its number of categories. For example, I wish it had more spaces for “variable” expenses. But it’s very simple to use and it works for us.

    @ Sandy (Comment #21), I’m a fan of pencil and paper when first starting a budget, just to get the hang of it for a few months, but frankly it’s really cumbersome. First, you sometimes have to write really small to fit the numbers and categories into the tiny little rectangles in those budget books. Second, adding all those columns up by hand is a real pain. Third, messy handwriting can sometimes be a problem, especially if you’re doing the budget with another person.

  18. I love, love the site, but…

    …it seems ridiculous to me to pay for budgeting software. It just does.

    I’ll stick to the Download.com version of PearBudget via Google Docs, myself. I love the spreadsheet and can’t imagine using anything else at the moment. I’ve modified it some to incorporate some of the Envelope Budget principles, but it works for me.

    And? Free!

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