Caught in a fix, and you need some cash to bail you out? Well, where does your money go? The vital step to gaining financial freedom is changing your behavior with money. A perfect way to do this is to start budgeting – this way, you can track down your expenses.
Tracking your expenses will help paint a picture of where your money goes. The following tools will help you track money.
1. Take an Inventory
Don't ignore the old school method of pen and paper. Writing gives an active brain, which is a crucial tool when dealing with money. The downfalls of this could include forgetting to record some expenses, misplacing the paper, et cetera.
However, whichever method you use to record, ensure you depict a specific order. For instance, you can make a list of all your assets, including money in the bank, investments, and portfolio. Next, take note of all your debts, including student loans, credit card debts, and mortgage. Once you have the two, subtract what you owe from your assets to get what you're worth.
This inventory should be a pointer to where the most pressing needs are – where you should focus the most—for instance, credit cards with accumulated interest.
Another expert tip involves looking at the previous year's bank and credit card statements. Knowing what you spend is the first step to changing your financial habits. Take note of what was worth your buck, and what wasn't, then eliminate the necessary.
You can also categorize your expenses into housing, utilities, daycare, and entertainment. Track down how much goes into each of these buckets and adjust accordingly. While doing this, strive to maximize investments and retirement benefits.
2. Utilize Every Dollar
Assign each dollar a job. Each portion of your income should have a specific role. Set aside what you'll use for everyday expenses, monthly bills such as rent, online shopping, savings, loan repayment, et cetera.
No matter how tempting it can be, resist the urge to budget after your money comes. You're likely to overlook some things or spend unnecessarily. Berna Anat, a financial expert, says she has seven bank accounts, each assigned different roles, according to her set monthly budget.
Kumiko Love, another financial expert, and creator of Live Rich Planner, recommends going the old school way. Withdraw your money, divide them into different envelopes, each with various labels such as entertainment, groceries, et cetera. This way, you're sure to meet financial obligations. You could even retain an extra buck.
Your spending stops when an envelope runs dry. This way, your money will track itself. Keep an envelope and mark it as Miscellaneous. When any of the other envelopes run dry, top it up with cash from miscellaneous.
This method could prove inconvenient in most instances. After all, you wouldn't want to carry coins and envelopes around, would you? And with the rise of e-commerce, cash payments are slowly becoming a thing of the past. However, this method is an excellent way to track money. Physically watching your money leave the envelope inspires a different level of responsibility.
3. Eliminate Subscriptions
Owing to the current world pandemic, many people are stuck at home. This means a change in needs and priorities. For instance, Netflix and Wi-Fi subscriptions are vital, while gym membership isn't. On the other hand, many subscriptions that you might have been initially paying for are free, while some have crazy discounts and offers running. Take advantage of these.
Carefully monitor your subscriptions, arranging them in the order of priority and usefulness. Cancel on the ones that are no longer serving their purpose. Be sure to note down every new subscription to make – just in case you forget it. Silent subscriptions can drain you big time. Meanwhile, keep looking for alternatives.
4. Negotiate
A phone conversation with a lender can be frustrating, I know. But such could also help add a buck in your savings account. Call the insurance companies, credit card companies, or any other lenders and negotiate the terms of your debts. This will help you avoid anything negative on your debt reports in case you defer payments.
Be direct, convincing, yet respectful when negotiating with a lender. Let them know your situation and why you can no longer make your payments. Ask them to lower your interest rates, or increase your repayment period.
5. Budgeting Apps
Apps like Mint are excellent budgeting tools. With these, you can create a budget in minutes. Further, you can log in and track transactions immediately when they occur. Be sure to record every other payment you make for extra convenience.
These apps will help attain a high level of convenience. You can change existing templates to meet your financial needs, set aside funds to meet other financial obligations, and more – sync your budget to that in your spouse's phone so you both stay on the same page.
The use of mobile apps demands one thing – consistency. You must be willing to record every transaction. If you're the forgetting type, find an app you can link with your bank account to stream your transactions, provided you correctly categorize your expenses.
However, having a budget is one thing, but sticking to it is yet another – and no app in the world can do that for you. These apps also send you periodic alerts, mostly weekly, of your status. This way, you can know your position and make adjustments accordingly. So, in need of real-time updates of your money movements? An app is your best shot.
6. Computer Spreadsheets
Let's go digital – shall we? Spreadsheets are common these days. The tons of available templates, the ability to customize your budget, and the magical feeling that comes having your math solved right in your screen makes spreadsheets the go-to option for many.
However, spreadsheets will only work well for you if you frequently key in your expenses. Without regular updates, it'll no longer be a budget, but a list full of good intentions you never met. Good intentions without your efforts can't help with your goals.
Establish spreadsheet checking registers to aid in plotting your bills before they're due. At the same time, keep a note of your credit card balance to ensure you don't spend more than your monthly budget.
7. Slow It Down On Cash
Cash transactions are the only ones that aren't recorded automatically. Credit cards, debits cards, checks, bank withdrawals all leave electronic records of transactions. This way, you'll save yourself the hassle of recording all your transactions manually – a go-to option for busy and forgetful individuals looking to watch their spending.
If you centralize them, reviewing your electronic records at least once a week isn't such a difficult thing to do – right? A notebook, spreadsheet, or budgeting worksheet comes in handy here.
Many people are more likely to overspend when using cards than cash. If you're one of them, it would be wise to stick to cash. Transitioning from cash to credit and debit cards can be difficult. However, tempting it can be, don't fall back.
8. Have a Goal
A reasonable budget would be useless if you don't put an effort to stick to it. One aspect that could help keep you on track is a goal. Setting attainable goals will act as a motivating factor to watch your financial habits. Goals such as saving for education, acquiring an asset, or setting up an emergency fund will give you that extra push you need.
Bottom Line
Gaining financial freedom is not only good for your present but your future too. Adopting an excellent method to track money is one big step to your business goals. Make tracking your expenses a habit, or it'll always be tricky figuring out where your money went. The above tools will come in handy, try them out.
This is not legal, financial, or professional advice. Please consult a legal, financial, or professional advisor for your specific situation.
Long, K. (2017, August 18). 6 Ways To Track Your Spending. Retrieved from https://www.forbes.com/sites/financialfinesse/2017/08/17/6-ways-to-track-your-spending/#339cdc246503
