Online budgeting involves using online money-management tools to manage personal finances. The types of online budgeting tools available vary from comprehensive educational sites that track users' spending to online bank accounts that allow people to use a graphical interface to visualize the allocation of their funds to different needs. In addition, some sites assist users in developing a budget by helping them to break down income and expenses so that they can understand how much they can afford to spend each month on needs and wants.
While many people either forgo formal budgeting altogether. work out their budgets with pen and paper, or use the traditional envelope method, others find that online budgeting is a quicker, more accurate way of managing their money. Online budgeting tools frequently incorporate accurate calculations and real-time reporting from financial accounts and can be easily programmed with budgeting formulas so as to customize recommendations to individuals. In some cases, these services are free of charge, while others either require payment or for users to open a financial account with a sponsoring institution.
Many people prefer online budgeting because it may not require a change in their daily routine, as does traditional budgeting, which may require a daily, weekly, or monthly reconciliation with pen and paper. Another aspect of online budget planning is that it can offer immediate accountability to those who have granted the budgeting site access to their accounts. Once spending or overspending takes place, the user can be informed of this immediately either through the budgeting tools interface or via e-mail. For some people, being able to visually organize their finances can make a huge difference in how they relate to their money. If they can actually see through the use of graphs or other illustrations how they are spending their money, they may be more likely to manage it more carefully and to address specific areas of wasteful spending.
Some concerns about the use of online budgeting tools include the vulnerability of users' financial information. An organization that sponsors these tools may be vulnerable to hacking, which would expose critical information and could create a significant and ongoing problem for users. In addition, given the anonymous nature of the web, it is possible for a less-than-scrupulous organization to offer budgeting services and then use participants' information for its own purposes.