This is my first blog post. Yep! My very first one. To mark the occasion, I wanted to write about something EXTREMELY important! It’s often totally forgotten when people think about money, but it’s one of the foundational steps of financial health, and if you don’t take it, you’ll NEVER climb out of any money rutt. Here it goes:
TRACK YOUR SPENDING!!!
I know, everyone hates it. It takes too much time, it’s completely boring, and no one wants to face the reality of their (potentially) bad habits. But, if your money is disappearing, there’s only one way to fix it: find out where it’s going!
1. The Old Fashioned:
Save your receipts! This one’s great if you pay for things with cash and debit/credit. Whenever you pay for anything, just save the receipt. Designate a section in your wallet as ‘the receipt section’ and stick every single thing you pay for in there. If you buy a lot of things, you might have to go through every week and clean it out just so it doesn't build up (maybe put everything in a centralized zip-lock every few days), but the point is to track EVERY-SINGLE-THING you spend money on.
At the end of the month, go through and reconcile everything. Take an hour on a weekend, get yourself a nice cup of coffee, put on your favourite tunes, and mark what you spent. Make a google sheet or excel form and type in a little chart with all the items you bought and how much they were. Then go through and put everything in a category, (food, entertainment, essentials, etc.) If you’re spending cash and cards you’ll have to remember to look at your debit/credit statements as well and add these in there.
After you’re done, take a look at what the largest categories are. Is there anything that surprises you? Did you overspend in a category you hadn’t planned on? Could you remember what items were on each receipt or were there purchases you had forgotten? These are the things that are really important to take a look at. If at the end of the month you’re looking at receipts and don’t remember what items you purchased, or if you see there is a higher spending amount than you had anticipated, you’ll need to reevaluate your budget.
2. The Monthly Check-in:
If you pay for everything in debit / credit, this might be a good choice for you. We don’t think about it, but all of that information is automatically tracked by the bank. At the end of the month, you get statements of everything you’ve purchased. How many of us actually take a look at those PDF’s they send out every month? When’s the last time you even checked the mailbox on your online banking?
At the end of the month, download those statements. Go through them all and mark categories for all of your spending. Notice which categories are appearing the most, or have higher spending amounts. Anything unexpected? THIS is how you’ll understand your spending habits. You don’t need to be completely frugal and cut everything out of your life to have money. You just need to understand your own habits, wants and needs, and budget within those.
And my personal favourite…
3. There’s an App for That!
This option is my favourite. It takes the least amount of time, and it gives you so much more insight into your spending than you could have ever imagined! There are so many different budgeting apps out there to consolidate your expenses. A few examples are: Mint, You Need a Budget (YNAB), and Wally but you can definitely google around - so many more are popping up every day!
With some of these apps (Mint, YNAB), you can connect them straight to your bank accounts. Whenever you spend anything it will automatically sort it and place it into preset categories. You can also go through and manually change or add any categories you’d like. At any time you can go in and see a live version of your finances. Anything you’ve spent, anything you’ve gotten income from, how much you’ve got in your savings, etc. (Tip: If you are concerned about the security of online banking, you can go with Wally instead, which lets you scan all of your receipts and track a little more manually your expenses without having to connect your bank accounts!)
It’s a great way to have a full overview of your entire finances. With these apps, you can go through whenever you want, and check on how you are doing and how close you are to your spending limits. You can set up different budgets for specific categories, and they will send you text messages or alerts when you go over budget to keep you accountable. (Yea, it’s COOL)
The only danger with these apps, especially for people who are just starting to track their spending and change their habits, is that it is a passive act. You can ‘set it and forget it’, which is convenient, but if there’s no action beyond that, you’re not actually going to change anything. You still need to actively go in each month and look at the information. Be honest with yourself, mark it on your calendar, set a free full hour to go in and check your app every month. If you’re going to choose to budget with an app, USE IT. You still have to set the budgets, you still have to look at what you’re spending. (and not just the overview page either, go through with a fine-toothed comb. Tech is really advanced, but sometimes they get it wrong. Make sure you go through each transaction to see if they’ve properly input it. Usually they learn, but I once had an app tracking my rent under a ‘music’ expense for 3 months without realizing. It can really mess things up!)
Conclusion:
So those are some of my favourite ways to track expenses. I hope you’ve gotten something out of this and you’re going to try something new with your finances this month. Whether it’s paper or an app, the important thing is to track. One of the biggest mistakes that we make when we’re budgeting, is guesstimating. We think we want to spend a certain amount, but if we’re not actually taking a look at our current habits, that number is nowhere near close to realistic.
You forget the little things you spend on, and then in order to stick to that number you’ve arbitrarily settled on you have to completely change your lifestyle. THIS NEVER WORKS. You can’t just wake up one day and suddenly be a different person. (I know, it’s frustrating for me too, there are tons of things I wish I could change!) Be realistic and honest with yourself. You are not failing because you aren’t good enough, or you don’t want it bad enough. It isn’t working because it’s not the right path for you. Change is slow, if you really want to change your habits, they’ll change, but it won’t be tomorrow.
Let me know what you thought about this post in the comments below, how do you track your finances?