In a previous post I talked about my method of tracking our household cash flow in order to determine if we are spending more or less than we earn. I also keep track of our spending that occurs on our visa as well as automated debits from our chequing account.
As worthwhile as I think those exercises were, I stopped doing them for the simple reason that I’ve been stressing out too much over our finances as a result of following them too closely. In particular, when following the individual expenditures I tended to get upset if we had unplanned expenses which affected our cash flow. Now I don’t want anyone to think that we are just going ignore our finances – far from it! We aren’t going to change our spending habits and the plan is to look at our bank account at the end of the month, figure out how much “extra” money we have and hopefully put that money into the mortgage. This “extra” money at the end of the month should be an indirect proxy for the cash flow calculation and will tell us how much we’re saving each month.
It was very educational to keep track of the expenses and cash flow for the last six months and hopefully we’ll do it again sometime in the future.
13 replies on “Reduce Finance Tracking”
I’ll tell you how I manage this:
I have a simple budget on a spreadsheet that includes all income and expenses monthly. This budget tell me how much we should be able to save each month ($x). If we save $x or more I am happy. If we save less than $x, I can usually explain why. The ‘why’ must be something that was agreed upon prior (ie a large home improvement, or vacation).
This seems to work well for us. I don’t save what’s left at the end of the month; but rather, I save what’s there in the first place. I only allow enough cash to sit in our account to cover bills.
I’m not hardcore with my tracking, and generally don’t worry about any given month. I find tracking useful to spot any bad trends. But in any given month there are always going to be those expenses that you can’t help. They should be part of the yearly budget but not the monthly budged.
Thanks for the comments guys!
Mike
Hey FP, yea, i’m the same way too. Even with tracking my net worth publicly with the blog it drives me nuts when i get unplanned expenses. I think the key is to make more money. 😉
MDJ – haha, yes I think that is definitely the solution. Preferably in the form of a large lottery win!
Mike
Good Post FP,
As an advisor with IG (about 8 years ago). I was taught to try to help people with their cash flow so they could invest more with me!
Problem was, you guessed it car need to be repaired, dog needs to see the vet etc. etc. The answer I found was set up a pac into RRSPs or Smith Manoever (increase mortgage payments etc.) If the client got more debt on his/her LOC generally, they cut back somewhere else to pay down debt! (this assumes they live within their means!)
Bottom line cash flow is is tough to manage! Just increase pacs a little (like weights at the gym!)
Wish there was a better solution but I have not found it yet!
Brian
When I first moved out in university, I used to track EVERY expense I made. Even down to 25 cents for a payphone call. It got tiresome, so I got the point that I knew how much I would spend, on average, every day. 10 years later, I still use that average number in my cashflow spreadsheet, though I have bumped it up a few years to account for inflation and increases in lifestyle.
Once I get married, I may try it again for 6 months to see how different it is.
BP – you’re right that cash flow can be difficult sometimes and never easy.
Nobleea – marriage (and kids) can definitely change your finances.
Mike
I definitely have pulled back on my time spent on tracking since my son arrived on the scene. There’s definitely some value to understanding where the money goes, but understanding where every single last penny goes is often counterproductive.
A good tip we’ve found is that we try to keep all of our spending on two credit cards, and pay them off in full each month. One is for my wife’s online business, and one is for all of our personal expenses. When I say all, I mean all – if I buy a $.50 coffee, I put it on my Amex if they’ll take it. This way at the end of the month we have a quick and easy way to scan our expenses.
Brip Brap – putting purchases on credit cards is a good way to help track them. I don’t normally charge things that are less than $20 though.
As for a $0.50 coffee – where does one buy a coffee for that cheap?? I always have way too much change to I try to use it on small purchases.
Mike
Mike,
Off topic here, but in the spirit of Canadian Capitalist’s plea for suggestions. I think you have mentioned you had a young child. I will become a Father in January. What advice can you give me, financial and otherwise about the whole process of Maternity leave, and expenses related to the new member of the family.
MG – congrats again on the upcoming child.
I’d love to do a post or ten on that topic. I’m sure you’ve heard the advice that “everyone’s situation is different” about a million times by now and the fact is, it’s true when you’re talking about babies.
However I can certainly detail our experience with the financial side of things and hopefully it might help a bit.
I’ll start off here with a non-financial tidbit that I learned a couple of months before my son was born – I thought all babies only needed changing once or twice a day but I was shocked to find out that you have to change them about ten times a day for the first several months. 🙂
Mike
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