How much time does quality money management really have to take?
I find that the easiest thing for me to say is, “I’m too busy.”
I’m too busy to organize the hall closet.
I’m too busy to weed the garden.
I’m too busy to stay on top of unread email.
I’m too busy to balance my checkbook.
It’s easy to be busy, and we just get busier each month, each year. If you are telling yourself that eventually you will get around to tracking your expenses and budgeting when you can find the time, it’s not likely that it is going to happen.
It’s time to sit down and do it because once you’re set up, you can keep track in just 30 minutes a month.
Search the Web and you can find hundreds of different suggestions for tracking your money: there are thousands of websites, phone apps and applications dedicated to this. There is one simple solution that works for me: spreadsheets.
This solution will help you to:
- Know where your money is going
- Track your money despite a busy life
- Track all types of expenses
- Get on top of your money and your debt
The first step is to categorize your spending.
Make the most of online banking. When I start every month, I sit down with my friendly Web browser of choice, log into my financial accounts, and pull up their list of monthly expenses. It saves me time that the bank through which I have my checking account has a money manager that attempts to automatically label each transaction into an expense category. I do a quick review of each one and correct any transaction that ended up in the wrong category. Then I can click over to a summary page and see the amounts for each expense.
My husband and I pay for most things with our credit cards, which are tied to our checking account and automatically pay the full amount each month. This way, I feel protected against losing a bunch of cash or somebody draining our checking account, and I can fully use the banking’s online software to help me categorize spending.
The next step after categorizing your transactions is to write it down.
This is where the first spreadsheet, your personal income statement, comes in handy:
Suggestions for expense categories:
- Housing: rent, mortgage, property taxes, home owners’ insurance
- Utilities: phone, cell, TV, Internet, gas, water, security
- Household: furnishings, gardening, misc.
- Groceries: food, toiletries, household supplies
- Personal: haircut
- Transportation: car loan, gasoline, transit, parking, taxi
- Health care: medication, contacts, solution, dental
- Dining out: fast food, snacks, restaurants, coffee
- Entertainment: books, CDs, recreation, movies, hobbies, memberships (gym, etc.)
- Child: day care, camps, activities, lessons, school fees, educational supplies, baby sitting
Now that you’ve entered your monthly income and expenses, you’ll see how well you spent your money this month.
Make it a habit to track your expenses regularly. Designate a time to do this and you’ll save time (by not getting overwhelmed by too much to do all at once), protect yourself (by always keeping an eye on your spending so you know if a credit card is stolen), and have good data for organizing your financial life.
Now that you’re done with your personal income statement, move on from your transactions to your accounts and enter this in your personal balance sheet. This one tracks your assets versus liabilities and tells you your net worth.