Getting Started with Monarch Money: A Comprehensive Guide
Monarch Money is a powerful tool for managing your finances, but getting started can be overwhelming. In this guide, we'll walk you through the essential steps to set up and customize Monarch Money to fit your personal financial situation.
Linking Your Bank Accounts
To begin, link all your bank accounts, including checking, savings, and any other accounts with regular transactions. Rename these accounts to make them easier to identify, such as "main checking account" or "emergency fund." Avoid linking Venmo or PayPal accounts unless you use them frequently, as there may be pros and cons to linking them.
Categorizing and Personalizing Categories
Next, go to the "Settings" and then "Categories" to view the 60 preset categories. Clean up and customize these categories to fit your personal situation. Rename categories, add emojis, and edit them to make them more personal and manageable. Get rid of categories you don't use and deactivate them if necessary. If there are categories that Monarch Money doesn't have, you can easily add a new category.
Cleaning Up Categories
If you have a category that you want to get rid of, but it has transactions associated with it, move it to "Uncategorized" for now, and then categorize the transactions later. Categories can be deactivated, but not deleted, to avoid losing transaction data.
Transactions Tab
Go to the Transactions tab to view every single transaction, including those imported from linked bank accounts. Transactions may take weeks to months or even up to a year to import, depending on the bank's rules. Clean up transactions by reviewing each one to ensure accuracy, especially for those that are not automatically categorized correctly. It's recommended to go back at least one full month, but ideally three months, of transactions to ensure accurate data.
Correcting Incorrectly Categorized Transactions
Go through each transaction and correct any that are not accurately categorized. Click on the incorrect category and choose the correct one from the dropdown menu. This will update the transaction automatically.
Creating Rules
Rules are ways to automatically categorize transactions in Monarch. Creating rules as you go through transactions helps to ensure accuracy and saves time in the long run. When encountering an incorrectly categorized transaction, create a rule to automatically categorize it correctly in the future.
Example: Creating a Rule for Gift Card Purchases
If you regularly buy gift cards for others, create a rule to automatically categorize these transactions as "Gifts" instead of "Pets" (for example). Click on the "Pets" category, choose "Gifts", and click "Create Rule" to set up the rule.
Automating Transactions and Creating Rules
Go to the "Rules" tab and click on "New Rule." Choose the "Merchant" option and select the specific merchant you want to create a rule for (e.g., Pampered Pet Care). Set the rule to categorize transactions from this merchant as a specific category (e.g., "Gift"). Click "Apply" to apply the rule to existing transactions. Use the "Preview Changes" option to review the changes before saving.
Creating Rules for Transactions from Venmo and PayPal
Go to the "Transactions" tab and create a filter to show only transfers. Create a rule for Venmo or PayPal transactions that categorize them as a specific category (e.g., "Piano" or "Preschool"). Use the "Amount" option to specify the amount of the transaction that triggers the rule.
Transfers Within Transactions
Go to the "Transactions" tab and create a filter to show only transfers. Scroll down to the "Transfer" category to see all transfers. Manually update each transfer to the correct category (e.g., "Child Activities" or "Restaurants and Eating Out"). Create a rule to automatically categorize similar transfers in the future.
Handling Unlinked Venmo and PayPal Accounts
If you did not link your Venmo or PayPal accounts, you will need to manually update transfers to the correct category. If you linked your accounts, you will see two transactions for each purchase: a transfer from your checking account to your Venmo account, and then a transaction from Venmo to the merchant. The transfer from your checking account to Venmo should be categorized as a transfer, while the second transaction should be categorized as the actual purchase (e.g., "Restaurants and Eating Out").
Categorizing Transactions
Linking accounts will create more transactions, including duplicates. Be aware of transfers vs. expenses: one is a transfer, the other is an expense. If you don't have many transactions, it's okay to simplify by not linking accounts. If you do have many transactions, be aware that one is a transfer and the other is an expense.
Creating a Budget
Go to the Budget Tab and select the next month (e.g., September). Review each category, noting the last three months and the average. Use the average for each category, unless you know it will be higher. Click on categories to view the average and adjust as needed. Don't forget to review categories with no budget to ensure accuracy.
Budgeting with Monarch Money
Use the "average" feature to get an accurate picture of spending. Adjust categories as needed to reflect actual spending. The budget will update in real-time as you adjust categories. The goal is to have the remaining balance be $0 or negative (green).
Next Steps
Consider syncing funds, savings, and goals with Monarch Money (video or resource coming soon). Leave a comment for more help or feedback on Monarch Money. Check out Taylor from Evolving Money for expert advice on Monarch Money (link provided in description box). Learn more about Monarch Money and budgeting with Monarch's website and YouTube channel.