One of my friends has decided to take a closer look at his personal finances. He and his wife make good money, but they live paycheck-to-paycheck. They spend whatever they have. It’s only since starting to track his expenses in Quicken that he’s discovered, for example, that each month he’s spending over a thousand dollars on groceries. This realization has prompted him to create a budget. Now he has some financial goals, and is trying to track the money he spends.
But tracking expenses can be tricky. The work is easy — it’s the motivation that’s difficult. I’ve been using Quicken for almost a decade, and the routine is drilled into my brain, but still sometimes I discover that I’ve forgotten to track my spending. (I especially have problems with cash — I forget to ask for receipts.) Last summer, an AskMetafilter user sought help on this subject:
Do you have any tricks to ensure that you track your money? I would like to track what I spend and what I spend it on. I have MS Money 2006, but I hardly ever use it…I find it hardly ever categorizes everything correctly. This is really more of motivation thing then a “how to” or “what’s the best system” question.
I’ve thought about just using checks, but that would be giving up the convenience of my debit/cards (plus the tiny percentage money back I get for using them). I use my cards for everything. I save all my receipts in my wallet and empty them into a manila envelope when my wallet starts to feel too big, which could take a few weeks. I would like to go thru my receipts and itemize everything; the problem is getting around to doing that.
I believe that this fellow is sabotaging himself by turning this into a HUGE task. If I go two or three weeks without reconciling my accounts, they’re a mess. When I process transactions more often, it’s easier to discover problems before they’re out of hand. Did I forget about that eBay purchase I made with PayPal? Or those two television shows I subscribed to at iTunes? Because I track my transactions often, I’m able to catch these things before they hurt me.
AskMetafilter users offered suggestions, but I think the original poster was left unsatisfied. Among the tips were these:
- Create a system. Make it painless. Come up with techniques that are easy and mindless, and then make them automatic. Develop a routine. Have a place for your receipts and your bills. Follow your system.
- Make the most of on-line banking. Check your account often, and set up as many automated transactions as possible.
- Do your finances regularly. The longer you wait, the more transactions there are to process. The more transactions there are to process, the more intimidating it all seems. Don’t procrastinate. Designate a time to do your finances and do them.
- Develop self-discipline. Ultimately, this is a problem that only you can solve. You must force yourself to track your spending if it’s something that’s important to you.
- Create custom categories. Don’t be hamstrung by the default categories in Microsoft Money. (Or Quicken.) Create categories that make sense for you and your situation.
- Work with a partner. If you’re in a relationship, ask your partner to help prompt you to track your spending.
- Post a visible reminder. Frykitty suggests putting up a graph of your progress. I think that any visual cue should help: a sign, a photo, etc.
In my response to the question, I noted that the best trick to tracking your finances is just to do it. Just start. Find a method that works for you, and use it. I spend maybe 10-15 minutes each weekend on my finances, and another 10-15 minutes to reconcile my statements once each month. The key to making this system work for me is routine: I always tuck receipts into the same spot in my wallet, I always put bills in the same drawer of my desk, and I always run through a mental checklist when I do my weekly finances.
The most important thing is to do what works for you. There are optimal solutions, and there are good solutions, but the best solution is the one that you actually make a habit.
[AskMetafilter: Do yo have any tricks to ensure that you track your money?]