Budget

Your Budget is going to be where you do your planning for that month's expenses. Keep reading to understand how budgeting works in Monarch and how to customize your budget.

Monarch budget are built around a monthly cash flow system. Your total budget for a month is based on how much income you expect to receive in a month. Expenses and savings are subtracted from the income to create your balanced budget.

The planned budget encourages you to get to a balanced budget by telling you how much you have "left to budget or save":

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As you spend money throughout the month Monarch automatically helps you categorize transactions into appropriate categories (like mortgage payment, restaurant, etc.) and you can plan for the amount you wish to spend in each of those categories.

Monarch also works without setting up a budget at all if you wish to just monitor your cash flow. If your expenses are less than your income Monarch will help you track what % of your income was left over (saved) each month. Or you can track where you spend money without setting up budget amounts for categories on the cash flow page:

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Budgeting Account Balances

The cash flow system used in Monarch is a different budget philosophy than account balance based systems. These systems require you to look at money in the past after you have already received it vs planning for future cash flow. They typically require that you setup and maintain a very detailed accounting of every single dollar using your account balances.

Monarch uses account balances for budgeting your goals in long term planning and does not use account balances for regular daily spending. It is possible to run an envelope or zero-based budgeting system using Monarch as long as its based in cash flow. This would look like: income = expenses + savings.

Connecting Accounts & Categorizing Transactions

The first step to set up a budget is to make sure all your financial accounts are connected to Monarch and the transactions are categorized accurately. In particular you should make sure your income transactions are categorized correctly as paychecks, interest, bonuses, business income etc. Since the budget is based on income these are the most important transactions to make sure are categorized correctly.

Organizing Your Categories

Once your income is categorized it's a good idea to take a look at the ~60 system categories and decide which ones you want to keep vs deactivate. The system categories use machine learning to automatically recognize merchants and get better over time by automatically putting transactions in the correct category so it's usually best to use them if the categorization looks accurate.

Deactivating default categories makes it so you won't see them anywhere.  They will still be greyed out in the categories settings page in case you ever need to re-active them. We recommend disabling any of these system categories if they don't apply to you. For example:

  • Education (if you aren't in school)
  • Children (if you don't have kids),
  • Auto (if you don't own a car)
  • Business (if you don't own a business),  

Custom categories can be created but will not use the machine learning to categorize new transactions when they come in so you will need to setup rules to automatically categorize new transactions or review them manually.

There are 3 layers to the category system from top to bottom they are:

  • Type (Income, Expenses, Transfers - these can't be changed)
    • Group (Housing, Food, etc - these can be customized)
      • Category (Rent, Groceries etc - these can be customized)

Ideally the Income type has groups and categories where you mostly receive positive transactions and the Expenses type receive negative transactions. The Transfer and Credit Card payment categories are excluded from budgets and cash flow so they are good for tracking money moved between your own accounts that aren't inflows or outflows.

Pro tip: the order you sort the categories in the settings page is the order they will appear in all lists throughout the rest of Monarch. Some people like to alphabetize their categories, others like to sort them on frequency of usage. Sort them however makes sense to you!

Estimating or Resetting a Budget

The first time you visit the Plan Budget page it will use a monthly average from the last 3 months to set a planned budget amount for each category. You can change any of these estimates by clicking into the fields and changing them manually. You can also reset the budget amount for a category using the last 3 month average just like the first time you visited the page by clicking the amount on the dotted bar in the modal that comes up:

We are shown the use of a budget page where categories labelled Fun Money, Personal, and Clothing are having their planned amounts adjusted

When making edits to a planned amount it only saves for the month you are viewing. If you wish to change the planned budget amount for future months you will need to make sure the box "apply to all future months" is auto-selected:

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If you don't have (or want) to plan a budget amount for a category you can set it to $0 which will hide the category at the bottom of the category group:

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Clicking it will still show how much was spent in that category even without a budget on it.

Excluding a category from your budget

You can pick and choose which categories you would like to actually contribute to your overall budget. By default, default categories will always contribute towards your budget. When you create a custom category, you can immediately decide if you would like exclude the category from your budget.

To update an existing category to stop being included into your budget on desktop:

  • Navigate to your Budget or your Categories settings page.
  • Find the category you want to no longer contribute to your budget.
  • Hover over the category name and select the settings gear icon.
  • From the category settings here, you can toggle Exclude this category from the budget. This and any transactions linked to it will be hidden from your budget. 
  • Select Save. The change will be updated immediately. 

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