You’ve got to come up with a method of tracking how you spend your money. It doesn’t matter how you do it, just make sure your expense gathering device tracks every penny.
Choose Your Tool
What does your expense gathering device look like? It could be cloud-based with account aggregation and an app for your phone, standalone accounting software, or a customized spreadsheet. Maybe you’re a receipt saver, or you like keeping track with paper and pencil.
It doesn’t matter how you do it, just make sure you’re tracking every penny and accounting for all the ways you spend money. That includes debit transactions, credit card charges, cash outlays, checks if you still write them, and anything else.
Technology can help some with this boring, mundane task. Many expense gathering devices offer cloud storage, automatic updates, reconciliation tools, and smart phone alerts. Still, if you’re doing it correctly there will always be a bit of grunt work associated with tracking every penny, so it’s important to find an expense gathering device that suits you and is easy to use.
I don’t like making recommendations for expense gathering devices because it’s such a personal thing. In our era of big data, do your own research and find one that suits you. There is an astounding array of choices out there.
Why do I put so much emphasis on expense tracking? Because if you’re not tracking your expenses, your overspending, it’s just human nature. Even if you’re made of money, you still need to track your expenses and put what is hopefully a larger chunk of change towards your financial goals. Everyone needs to protect their most important money and financial dreams.
Customized Expense Categories
It helps to organize your spending into expense categories. If there’s a list of expenses provided by your expense gathering device, don’t be afraid to edit it. Combine categories into one to make tracking easier. Come up with colorful names for some, delete the ones you don’t need and add to the list if necessary.
Your goal is to not only to entertain yourself in the future when managing your device but make it easier to remember where each expense goes. For example, every time I come across the expense category “mane drain,” which represents anything to do with hair care, it makes me chuckle. It sure makes it easier to remember where dollars spent towards hair goes.
If any of your expenses are tax deductible, use the same name for that expense that the IRS uses on your tax return. Personalize your device any way you can to make it as easy to use as possible in the future.
If you’re having trouble sticking to a particular expense category’s budget, you might want to go old school on your overspending. Consider using the envelope method.
It seems cash is becoming extinct these days, especially post-pandemic, so you might think I’m offering bad advice, but the envelope method really works. In fact, the pandemic made the envelope method even more effective. At the beginning of the month, write the problematic expense category name on an envelope. Write the monthly budget amount for that expense on there too. Go to your bank or no-fee ATM and withdraw that amount and put it in the envelope.
Whenever you want to spend from that expense category during the coming month, you must do so from the envelope. Forgot to bring the envelope along to work? You’ve got to go home and get the envelope before you can make a purchase for that expense.
These days, there’s a chance the vendor involved in your transaction doesn’t take cash. Now you’ll have to transfer the appropriate amount of cash to your checking account to cover that electronic transaction. That’s even more of a hassle.
Your expense gathering device, if it’s an app or cloud service, more than likely enables you to do the same virtually, with lots of bells and whistles to help you keep track. Regardless, all this envelope spending is terribly inconvenient and annoying, which of course is why it’s so effective. Try it out on a challenging expense category or two.
Keep it Up To Date
Using an app that aggregates all your accounts in the cloud, like mint.com, makes keeping your expense gathering device up to date a breeze. If you’re manually entering expenses into your device, make sure you’ve developed an efficient system of saving and entering data. Check your transactions online at your bank’s website if you think you’ve missed some.
Keep it Secure
Maybe it’s because I grew up before the internet but saving my sensitive financial information somewhere in someone’s cloud makes me nervous. In our era of big data, I’m sure that information is already out there, despite my efforts to keep it private, but I’m still paranoid. Maybe you should be too?
Keep sensitive credit card information close to the cuff and access your statements as soon as they’re available to avoid any trouble. However, the accounts you really need to watch closely are your checking and investment accounts. This is where you are most vulnerable.
If your expense data gathering device aggregates your checking account information along with your other financial accounts, keep a close eye on that checking account. Multiple vendors and creditors probably have access to it, and identity theft is everywhere these days.
You’re more vulnerable and liable for much more money in your checking account than a credit card account. Like your credit card accounts, access checking account statements as soon as possible and reconcile promptly. Think twice about giving a creditor or vendor free rein over it.
The more money you have in an account, the more vigorous you need to protect it. I’d choose not to aggregate investment and retirement accounts with your expense gathering device. Monitor them separately and set up two-factor authentication if you haven’t already.
Expense Gathering Device
Everyone needs an expense gathering device. You’ve got to come up with your own version that tracks all the different ways you spend money. Remember, if you’re not tracking your expenses, your overspending, it’s just human nature.