Tag: Tracking expenses

Know Where Your Money Goes

It is a simple truism that what gets measured is also what gets managed. I can think of few other places where people fail to put this truism to good work beyond their money behaviour. People will track their calories, the amount of gas they put in their cars, the number of times they work out. Yet so few people will track their own money.

This is very perplexing to me. Tracking your money is one of the first steps towards controlling it. You have to know where you money goes.

Lately, I’ve been hearing a lot of talk about “self-care”. Since this is a personal finance blog, I’m going to put my own little twist on this idea. You can feel free to share this bit of wisdom with anyone and everyone.

One of the best ways for you to practice self-care is to know where your money goes. Every single time you spend money, you should know exactly where it is going and why. Anything less is a self-inflicted financial wound.

When I had cable, I loved watching “Til Debt Do Us Part”. (Sadly, the show has since been cancelled.) It was a TV show about couples who turned to a guru to help them figure out their money before money destroyed their relationship. The very first thing the couples had to do was track their money for a month or so before Madam Guru showed up.

Most of the couples had never tracked their money. I always enjoyed the look on their faces when they discovered that they were spending hundreds of dollars each month on bank fees and coffee! It was as though they’d convinced themselves that small amounts didn’t really count when it came to spending their money.

Does this sound familiar to you? Is it possible that you’re one who believes “it’s only a couple of bucks” each time you buy a coffee? Never mind that you buy coffee two or three times a day, Monday to Friday… which works out to over $1000 per year on coffee alone. That amount could fund a nice weekend getaway somewhere.

Relax, relax! I’m not going to tell you not to buy coffee. It’s your money – that means you get to decide how it’s spent. If you would rather spend money on coffee than on something else, that’s your business. Your money, your choice.

And yet… Who among us hasn’t looked in their wallet or bank account and asked: “Where did all my money go?”

I’m here to tell you that getting a solid answer to that question depends on you. Measure you money so that you can manage it. Given how hard you work for your paycheque, it’s in your own best interest to understand why each of your dollars leaves your hands. In other words, you must start keeping track all of your money.

Some people use Personal Capital. Others use Mint. There are probably many other apps for money-tracking that are unknown to me. Myself? I’m relatively old-school. I don’t keep track of my money with lead pencils by candlelight anymore. Instead, I created two personalized spreadsheets. When I spend money, I keep the receipts then I add the amount spent to the appropriate spreadsheet. If I don’t get a receipt, I make a note on my phone of how much money left my wallet. Every nickel is accounted for. This how I know how much it costs me to run my life.

Thanks to the wisdom of TDDUP, I started tracking my spending in 2016. I have a spreadsheet for the cost of running my home where I track my monthly expenses. Those include lawn care, snow removal, Netflix, phone, power, water, car registration, property taxes, insurance premiums and internet. These are the standard bills that have to be paid on a recurrent basis, whether monthly or annually. Some expenses can be eliminated if I choose since they’re luxuries – lawn care & snow removal – while others are fixed. My car and home certainly won’t insure themselves! And I suspect my municipality will get testy if I were to neglect to pay my property taxes.

I have a second spreadsheet for the day-to-day variable expenses of my life. This document tracks my groceries, clothing, medication, gasoline, parking, entertainment, travel, gifts, donations at work, outside food & drinks, taxis, books, etc… Anything that doesn’t go towards the recurring expenses on spreadsheet #1 is recorded on spreadsheet #2. My goal is to spend less than $1,000 each month on these variable expenses. Since 2016, I think I’ve hit my goal twice!

You see, the beauty of my spreadsheets is that they provide me with information and insights into how I spend my money. Up until a few months ago, when I started cooking at home more often, I was spending atleast 1.5X more on food outside my home than I was expending on groceries. I don’t begrudge the money spent on outside-food (as I like to call it). I was hungry. The food was there. I had money – I ate – I wasn’t hungry anymore. The system was satisfactory… until I started pondering on my priorities for my money.

Was spending so much on outside-food getting me closer or further away from my goals? Was I spending the same amount each month on eating out? Would my money go farther if I cooked my own meals more often than not?

Tracking my money helped me to answer these questions. I was able to look at my historical spending patterns to see where I was spending too much. I analyzed which categories needed to be trimmed in order for my spending to align with my personal goals. The information garnered from knowing where my money motivated me to make better spending choices.

I challenge to you to track all of your purchases for a few weeks. Then determine for yourself if your spending choices are helping you to fund the priorities that matter most to you. Know where your money goes.

Track your expenses!

You’ll always know where your money goes if you track your expenses.

As trite and obvious as that sounds, I’m always amazed by the number of people who don’t do this simple task.

Have you ever experienced getting a paycheque then wondering where all of your money has gone? If your answer is yes, then you might want to consider engaging in an old-fashioned activity called keeping track of your money.

There are so many ways to track your expenses. Pen & paper is very, very old-school but still highly effective. You can use an app, since nearly everyone has a smart phone. You can download a spreadsheet from any number of websites. If you’re the creative sort, you can even customize a spreadsheet tailored to your needs. This is my preference since I’ve yet to find an app that has all of the categories I need and want. I also like to play with the color scheme to highlight various pieces of information at a quick glance.

For the past three years, I’ve tracked every nickel of my money on a spreadsheet. I know how much I’ve spent on donations at work, cab fare, groceries, eating out, and a myriad of other spending categories. At the end of the year, I add it all up and figure out whether I’ve spent too much, too little, or just the right amount for the life I want to live.

As you know, I’m a huge fan of automatic savings plans. I have a number of automatic transfers in place to fund my long-term goals like retirement, as well as short-term goals like annual vacations. It’s also how I find the money to do renovations around my house. I think ASPs are the cat’s pyjamas! I encourage everyone I know to use them to fund their own goals and dreams. If you haven’t created one for yourself, I promise you that it’s as easy as falling down. Go ahead – give it a try – create atleast one today!

The Others will take your money

Want to know a secret? The same people who won’t set up an ASP to fund their dreams are the very same people who allow others to automatically transfer money out of their bank accounts every month. Withdrawals such as these aren’t as much fun since they represent money leaving the warmth of your bosom…to go and warm someone else’s!

Some of these withdrawals are necessary. If you have a mortgage, then the bank’s going want to get its money or the bank will eventually take your home away from you. And if you decide to get a car loan instead of buying in cash, then I can assure you that vehicle finance company will want access to your bank account so that they can grab their loan payment on the appointed day.

Gym membership? Subscriptions? Insurance dues? Bank fees? Cable? Internet? Membership in the beer-of-the-month-club? Each of these purveyors will happily withdraw money from your bank account each month with an automatic transfer that benefits them, not you. If it comes out of your bank account, then it’s s direct hit to your bottom line. Most often, these good people want to take their skim from your wallet indirectly, which means that they will charge your credit card. Should you not pay your credit card balance in full, then you’re paying interest to facilitate someone else’s automatic transfer of money out of your bank account. Ask me if this is a very good thing and I will tell you: NOPE!

When you allow someone else to withdraw money from your bank account every month, you’re less aware of where your money is going and when. And I’m convinced most people have no idea when monthly bills are charged to their credit card. By drib and by drab, someone other than you regularly drains your account because of decisions that you made years ago about products and services that you may no longer even use. This is an utterly ridiculous way to manage your money.

Track your expenses & avoid interest charges

Like I said before, some of you might be putting these same monthly expenditures on your credit card. Notice that I said “card” – there’s little if any need to have multiple monthly charges on more than one card. One card means one bill, which is to be paid in full each month as it comes due. You do pay your credit card off in full every month – right?

Some people carry credit card balances from month to month, year after year. They pay exorbitant interest rates for the privilege of doing so! If you’re in this group, then I strongly urge you to cut back on your automatic monthly payments. You’ll have to live a lean life to get out from under your credit card debt. That means you stop using credit and you start using cash. When you run out of cash, then you stop spending money until you get more. It’s a very, very old-fashioned way of living but it is guaranteed to prevent you from going into debt.

Prioritize what’s most important to you

When you track your expenses and you simultaneously commit to living on cash, prioritizing your money is mandatory. In other words, you have no choice but to rank what’s most important and apportion your funds accordingly. Is paying the mortgage more important than your Netflix subscription? Does a gym membership trump the cable bill? Can you keep your wine-of-the-week and still meet the car payment?

From what I’ve observed, there are only two ways to satisfy all of your spending desires. The first and definitely more destructive way is by accumulating debt via credit cards. The second way is to limit your desires such that they can all be met by the money that you bring home. This is called living within your means.

I would urge you to pick the second method since it causes far less stress. You retain the power to decide how best to spend your money on the items that matter most to you. Start tracking your expenses and only spend your money on the experiences and things that bring you joy.