Nearly every financial guru tells potential budgeters to
start their financial management with a simple (but not easy) task:
track every single penny.
For some individuals, this is a relatively easy task. It’s
just a matter of building financial tracking into their routine. But
for most people, tracking expenses is often very difficult.
Thankfully, between modern technology and creative
budgeting solutions, there are options for tracking expenses that won’t
leave you feeling overwhelmed.
Here are three ways to keep you finances in check without driving stressing yourself out.
1. Use free budgeting software
As a MoneyNing reader, you are no doubt familiar with
Mint.com or PersonalCapital.com. After setting up one of these accounts,
you then connect all of your banking, credit cards, and other financial
accounts, for the site to start tracking expenses for you.
Users are able to categorise and subcategorise their
expenses. After the initial set up, all that is required from you is to
log in regularly to take a gander at what the software has tracked for
you.
The biggest push-back I get when I suggest using Mint or
Personal Capital to track expenses, is the worry about security. And
that’s certainly a concern, particularly after hearing stories of major
retailers getting hacked.
However, these companies take security very seriously, and
the only completely secure method of tracking expenses is doing it
yourself. Think of it this way: the risk of a security breach when you
use Mint or Personal Capital is very small, whereas wasting your money
by not tracking expenses is pretty much assured.
2. Set (and stick to) a spending limit
Certified Financial Planner Roger P.
Whitney does not have the time to be his own part-time bookkeeper,
despite working in finance. Because of this, he has come up with an
elegant solution to the expense-tracking problem: He sets a maximum
monthly spending target for himself, and only transfers that amount from
his savings account (where his paycheque is deposited) to his checking
account.
This solution gives him a monthly spending framework
without forcing him to save receipts or count pennies. As with the
option of using Mint or Personal Capital, using Whitney’s spending limit
plan means you will have to log into your checking account on at least a
weekly basis to make sure you’re not going to overdraw it.
3. Only track specific categories
If you can trust your spending decisions in most
categories, one option for tracking expenses is to only pay attention to
those categories that are problematic or high cost.
For instance, you might decide to track your dining out
expenses for several months to get a sense of how much you are spending
on restaurants. Instead of having to keep track of every single receipt
or purchase, you then only have to remember to log restaurant receipts,
and will still get a good sense of how much extra money you’re spending.
In addition, one of the benefits of tracking every expense
is the fact that you will likely think twice before making a purchase
because you’ll have to write it down. If you choose your two or three
“problematic” spending categories to track, you will still have the
benefit of thinking twice about having to track the purchase before
pulling out your credit card.
The bottom line
You may not be able to keep perfect track of every cent
that flows into and out of your life, but figuring out how to keep a
handle on your finances, while being true to your personality, will
allow you make the most of your money.
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