Reader Jazzmin26 recently e-mailed me after reading my Mint review and shared my security concerns. She asked for suggestions to “make my financial life simpler and not spent my weekends logging and tracking“. I’ve repeatedly wrote about how valuable I find measurement to be, but I agree with Jazzmin26 that it can sometimes be tough to determine the best way to go about it.
Not as Hard as it Seems
In life we often make things seem harder than they really are. Every year I agonize about my taxes, then they end up only taking me an hour or two and I’m happy to have a snapshot of my finances from the year before. Similarly, logging and tracking isn’t something that will take up entire weekends. I usually do a financial overview once a month (around the 1st) and I can capture all the info I need in 10 or 15 minutes.
Pen and Paper
I’m currently reading “Your Money or Your Life” and will post a review when I’ve finished it. A large part of the book is spent detailing how to record your spending. The authors suggest that the exact format isn’t as important as finding something that works for you. Come up with a sheet with the numbers you find important, then printing it out (or make photocopies) and fill it in once a month.
I’ve recorded my spending this way, but carrying a small notepad and a pen in my pocket. Every time I make a purchase, I pull it out and record it (on page per day). If filling in the amount wasn’t convenient, I’d just get a receipt and put it into the notepad at the proper place (like a bookmark) and transcribe them at the end of the day.
I like to use spreadsheets (Excel or OpenOffice Calc) to keep permanent financial records. I tend to agree with “Your Money or Your Life” that developing your own categories and measurements is probably the best way to go. My spending tracking looks something like:
How to categorize things (is alcohol food or entertainment? if you buy a round of beers, is that a gift?) is entirely flexible. If you eat out regularly, perhaps it is worthwhile to separate food into groceries and meals out. I keep my fixed, constant expenses (like rent, internet charges, etc) separate and just track my variable spending with this.
When I was tracking my spending, I’d also maintain an average of each category (typically for the last 30 days) as well as the total and could view where my money was going and whether my spending was increasing or decreasing.
In terms of my finances overall, I also use a spreadsheet and track the various accounts like so:
|May 1st, 2010||-$87,012||$23,732||$1,201||$2,022||$3,223||$159,000||$98,943|
|April 1st, 2010||-$87,203||$21,157||$1,257||$2,014||$3,271||$159,000||$96,225|
|March 1st, 2010||-$87,345||$20,121||$1,072||$2,007||$3,079||$159,000||$94,855|
|February 1st, 2010||-$87,501||$21,353||$1,413||$2,000||$3,413||$159,000||$96,265|
The Cash and Networth columns are calculated by summing the other columns (the checking account and the TFSA is the case of cash, all the columns in the case of the networth). Again, this only takes me 10 or 15 minutes to figure out each month (spreadsheets can easily do all the calculations for you – you just look up each account and enter the numbers) and I can see immediately a snapshot of my financial health.
I don’t bother tracking credit cards, since I always pay them off in full, anything I owe to the credit card companies will be reflected in the amount of money in my checking account the next month so I don’t think it’s worth the time to do the extra look ups. If I was carrying a balance on a credit card or a line of credit, I’d certainly track it monthly.
A number of bloggers, including Meg at World of Wealth, track their finances on Networth IQ. Much like a spreadsheet, it’s very fast and easy to update entries (just look up the account online and fill in the number). The site automatically creates a graph showing your networth over time, and shows how each category has changed (as a percent) since the last month.
As much as this does contain a lot of your financial info, I don’t think it has the same security concerns as Mint, since you’re manually transcribing information to it (not giving the site your usernames and passwords to look things up).
How do you track your finances?
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