Know how much money you have across all your accounts and shape your future with a personalized budget
In this post, I will hopefully convince you to start planning a budget today. The first part of the post is relevant to any person regardless of where they live.
You finally decided to figure out where you spend your money, how much money you have, and use technology to make sure you don't get into overdraft by planning a budget - Great! What is the first step needed to plan a budget? You can look for abnormal expenses in your activities by reviewing the transaction sheets. It might help you find a few mistakes here and there, but it will not let you see the big picture. People who budget frequently will tell you that to budget correctly, you must track every credit and debit regardless of its amount because the devil is in the small transactions.
How many transactions do you perform every month? Can you estimate? To give you a point of reference, I'm married with three little kids and a dog, we have a single bank account, three active credit cards, and we usually prefer using credit cards although we sometimes use cash. Checking my last year's activities, we had an average of 250 transactions per month, 8.42 transactions a day. It is way too complicated for a human brain to accommodate everything, so having tools that let you categorize, group transactions, and reconcile your accounts is crucial to understand the bigger picture.
Planning a budget
In a sense, it is easier not to plan a budget, but there are concrete reasons why you should make an effort.
Managing a budget puts you in control over your finances. You know exactly where your money is spent, and you can track mistakes, handle overcharges, and spend money wisely. It also helps you achieve your financial goals because you plan a year ahead, sometimes ten years ahead, and make adjustments when needed. When managing a budget, you are never surprised, can avoid overdrafts, and can plan for rainy days.
To do a budget, you must first be able to download all your transactions of your credit cards and bank accounts automatically. Although checks are logged with your bank account transactions, you need to review its scanned image to categorize each on your own. The process must be automated and reliable because you will run it multiple times every month. With payment like cash, Paypal, Paybox, and membership cards, you need to log them manually.
Once you figured out a way to download all your transactions, you will need to choose your preferred budgeting strategy. There are several budgeting strategies to pick from; each has its principles and agenda. You can read the article "The Top 5 Recommended Budgeting Strategies", which describes five common strategies (zero-based budget, 50/30/20 budget, envelope budget, priority-based budget, and “pay yourself first" budget). I tried most of them before settling with the zero-based budget. For me, this strategy is the most reliable one that doesn't let you cheat yourself and spend more than you have.
With a strategy in mind, you should find a budgeting service that follows that strategy and plan your initial budget. Start with reviewing your last three months' transactions, at a minimum. Split them into categories, and set goals for each category. This step might be different between strategies; for example, in a value-based budget, you list all values from most important, such as food and shelter, to least important.
A reasonable budgeting service lets you create categories and set goals for each category. Some basic services will let you set monthly goals like "spend up to 900 dollars every month for car fuel" or "spend up to 1,000 dollars on clothes". The more advanced services will let you set yearly or by-date goals like "save 4,000 dollars a year for car insurance" or "save 40,000 dollars by 05-2022 for my child Bar-Mitzvah". The service should import the transactions automatically; otherwise, you might be overwhelmed and will give up eventually. It would be great if it categorizes transactions automatically based on your history because an average family has a hundred transactions every month, and many of them are recurring ones.
I'm using You Need a Budget (YNAB) service, which is an international service that follows the zero-based budget. I think it is the best budget service ever, although it might be a bit complicated and sometimes frustrating. I've been using this service for three years now, and although I experimented with others, I never seriously considered replacing YNAB. A colleague of mine living in the USA mentioned daveramsey.com, if you are living in the USA, you can check this one as well.
At Halfway Through the Post – Thoughts
I hope this post motivated you or at least got you a bit more curious about budgeting. Budgeting can help you know how much money you have across all your accounts, shape your future with a personalized budget and avoid reaching overdraft. You should google about services popular in your country and pick one that both follows the budgeting strategy you favor and downloads transactions automatically from your countries' finance institutions. If you are living in Israel, keep reading.
The remaining of the post discusses the lack of tools in Israel that make it hard to manage a budget. There are many countries that don't worry about because they enforce open banking regulations. Unfortunately, in Israel, it is not there yet, so we need to find alternatives.
If you want to learn more about open banking, you can start with the article “No One Cares About Open Banking".
For people who manage their finance in Israel – keep reading
Using YNAB, or any other budgeting service when your money is managed in Israel, is not straight forward. To explain why I need first to discuss something called open banking. Open banking dictates how banks deal with your financial information. Under open banking rules, banks have to share your financial data, such as spending habits, payments, and transaction history, with authorized providers, like YNAB, if you provide them your consent. To learn more about “Open banking," I suggest you read the article “No One Cares About Open Banking".
Unfortunately, for open banking to become standard practice in Israel, there is a need for regulation to develop trust between bank customers and service providers. The Bank of Israel published a directive about open banking in late 2019, but it will take time until an API will be available for our needs.
Alternatives for the Israeli citizens
You can use YNAB or any other international service in Israel as-well but you will need to feed your transaction manually by yourself. There are some local services that can download automatically the transactions from Israeli finance as well as plan a budget. The biggest downside with those services is that their main business is budgeting, so you are locked into their service and cannot use them together with other services like YNAB.
If you are a company that develops finance applications, you can check out “Finanda Smart Aggregation". If you are an individual with some technical background, you can use an open-source library named ‘israeli-bank-scrapers', a library that myself and others maintain and is described in this post.
Regardless of what service you choose above, they all use a technique called scraping. Scraping may be used both in legit and illicit activities. In the open-source software I'm describing, scraping is used for good, to bring missing and essential services to consumers of Israeli banks. This is a stop-gap technique we use until the regulators and the big financial institutions catch up and start providing proper APIs.
Language: NodeJS (Typescript)
Owner: Elad Shaham
Maintainers: Elad Shaham and myself
GitHub Site: link
NPM Site: link
israeli-bank-scrapers is not a standalone application. It was written as a library to enable others to use it in their projects efficiently. More specifically, this library allows users to scrape transactions from all major financial institutions in Israel for both banking and credit cards. It uses a popular library that lets developers interact with the Chrome browser and perform operations directly. It then navigates to each Israeli institutions' website, logs into their site using your credentials and scrapes the transactions so you can then use them to create an excel file or push them automatically into YNAB or other services.
It is essential to understand that you are scraping only transactions that are available to you. To access your financial data, you must use your credentials. There are no hidden backdoors or unofficial procedures; the library can access only the data available to you by manually navigating to those sites. And of course, the entire codebase is publicly available.
A technical background is required to use this library. I'm working on an application that lets you download transactions directly into YNAB or excel file with an intuitive user interface. The application is named “HomeFunds," and it is under active development. It will be licensed as MIT, so everyone will be able to use it for free and access its sources to audit its activity.
You should try planning a budget, you are not alone, and you have tools that can help you succeed.
First, set a personal goal to have a workable budget a month from now. Then read about popular budgeting strategies, consider the zero-based budget, and check out available budgeting services in Israel.
If you have some technical background and you would like to give YNAB a spin, check out the israeli-ynab-updater node project, which can export transactions automatically to YNAB.
If you are a person with no affinity for programming, checkout Finanda mobile applications. Note that Finanda has two different products, one named Finanda smart aggregation which target companies and another one which is mobile application and target individuals, you should checkout their mobile applications. You can also read this article about other Israeli applications which is a bit aged but might still be useful.
Also, stay tuned to the initial release of HomeFunds, an open-source application I'm developing that will let you easily configure your accounts and push them directly into YNAB, export them to Excel, and more.