Finding your way through your finances seems difficult, but it gets easier.
Track That Spending
Wednesday, we spoke about cutting back on your spending to save money in your finances. It is a fantastic way to get more out of what you already have, but how do you know where to make cuts? That is done by tracking your spending.
We know that tracking spending is about as fun as pulling teeth, but just like pulling teeth, it is sometimes necessary. Do you know how much you spent on groceries last month? Do you know how much you spent on groceries this month? What about the amount you spent on gas? Do you operate off of a budget? You may think you are “doing just fine” but the “one trip here, one trip there” can really start to add up.
What was in your wallet?
What further complicates tracking is the advent of debit and credit cards. A few decades ago, you would open up your wallet and immediately know that you’ve been spending too much, but now you only know what you have once you sit down in front of the computer. All but gone are the days of balancing the checkbook (excluding the few old-schoolers out there). I’m not even sure if it is taught in schools any longer!
Once you pair up the inability to do a balance check each time you open your wallet with frequent trips to the store, what seems to be a “$20.00 trip” soon turns into a “$400.00 how could this have happened” mistake. This is why, and we’re talking about this at the end of the month, you should log into your bank account right now, pull a month to date report of your spending and start categorizing. Set up a category for groceries, restaurants, fast-food, entertainment, gas, utilities, and bills.
Your financial breath stinks!
Segmentation is like that honest friend that lets you know that your breath stinks. While ignorance is bliss, you still appreciate the information because it allows you to make more informed decisions. It helps you to avoid talking to that important business prospect, or that girl/guy you thought was cute. Notice how I separated fast-food from restaurants. I did that to truly see how we are spending our food money. Sure, you could lump groceries, restaurants, and fast-food into one category simply called “food,” but it won’t really help you. Be brutal, be honest, and you will then begin to see the real picture.
What good are untracked numbers?
Take the information that you find, and write it down on a whiteboard for this month. Then, next month, make a conscious effort to do better, and write down the results. Track your progress and see how tracking your spending can affect your spending for the better. There are softwares out there that can help to automate this process, but I highly recommend that you do it manually for the first few months so that you will have an appreciation for the speed and efficiency of the software.
But why write? I have an iPhone!
Yes, we know: There’s an app for that, but contrary to popular belief, software (or apps) aren’t as smart as we’d like to think. We will include some links below to some of the more popular softwares, including a few free ones. Understand though, software is not as smart as you in many respects, so don’t expect the software to make it completely effortless, you will most likely still need to categorize many of the purchases.
Some Popular Finance Software:
There are many other softwares out there, but these are the three that we have worked with in the past. All offer great flexibility and reports. Good luck!
About WealthArtisan
I am terrible at tracking expenses. I am sure it would help me, and would probably stop me from going to Panera for lunch today. But I want to go to Panera!
What mucks things up for me further is my husband’s work expenses end up on our credit card bill. So when I want to keep the bill under 2000 a month, it will suddenly be 5000, and I have to sift through what is our and what belongs to his work. I do love getting the rewards on the credit card though for his work charges that he gets reimbursed for.
When the kids go back to school and my head is back on straight, I may more aggressively track our expenses. I think fear is making me avoid it as much as anything.
Hey Kris,
I can’t blame you, it is definitely hard confronting the spending! I can imagine it must be hard balancing that card with all of those extras put in there by the business! We wish you the best of luck with getting your head on straight though
Thanks for stopping in!
Thanks,
Timothy
Wealth Artisan Team Member
http://WealthArtisan.com
I use Mint, but it does have its flaws. I think some weeks I spend more time “correcting” it than if I just had a notebook and pencil. There is something to be said for low tech!! I do Weight Watchers, and when I have to WRITE it vs ENTER it, I loose more.
I will say that since I started using Mint, I am MUCH more aware of where the money goes….particularly groceries and other food related expenses. And I like the budgeting as a whole.
Segregation….until I started separate accounts for certain things, I was constantly robbing Peter to pay Paul. Sometimes you have to see the different piles for it to make sense.
Hi Mysti,
I agree, Mint is excellent, but it takes getting used to and you often do have to recategorize. I like Using ally for banking because they are completely self service. I have 3 different money market savings accounts through them for different purposes. It is exactly why you said: sometimes you just need to visualize the different piles. Nice to see you dropping in.
Thanks,
Timothy
I agree on the value of tracking expenses. I don’t do it every day, every week, every month. Rather, I pick a month or two every year or so, and “audit” my expenses. By taking a sample of just a month or two, I can get a good idea of what my expense level is.
When I do track, I segment by very granular-level categories. Everything is recorded, down to the last penny. Then, I can analyze the data and determine any areas of waste that could be reduced.
At that point, after a month or two, I take the insights generated from this analysis, and apply it to my spending practices going forward, without spending excessive time on tracking.
Bottom line is it’s imperative to know how much cash is going out the door, and for what.
Very good post by the way, I like the way you presented an oft-discussed topic, and made it more interesting.
Hey Squirrelers,
Thanks for dropping in and giving your method. It really sounds like you know what you’re doing! You touch on an important subject, it is very easy to invest too much time in examining the numbers. Sometimes it’s better to look at it and just understand what not to do. If you spend too much time trying to understand, then you run the risk of being inefficient with your time. Thanks for your thoughts.
Thanks,
Timothy