Last month I discussed the role keeping accurate spending records play as an important early step on the road to financial wellbeing (check out Feel the Power and Know How Much You Spend).
As you take back control of your money, it’s important to have visibility of a range of your spending information and be able to cross-check activity against banking, credit card statements and cash on hand. For some people, the breadth of criteria that can be captured may seem daunting – and you may need to research your options to find a personal system that isn’t too onerous, but capture enough information to help you obtain (and perform) meaningful analysis.
People are motivated by a number of factors to maintain expense monitoring, including goals; and so I’d recommend that you experiment with various options to find a system that you feel comfortable using on a daily basis. Whilst you may choose to keep written records of your transaction, there are a number of online templates and digital applications you may find more convenient, and function as great analysis tools as well. As you commence your research, below are a couple to suggestions to get you going:
Build/Download a Spreadsheet:
If you have reasonable Excel skills, you might design a worksheet to track your spending, based on your own knowledge or borrowing from a range of available models. Alternatively you might download one of many templates from the web. One of my favourite Australian budgetting sites have free online and Excel spreadsheet options.
At Curious, Interested ..., we have also developed both simple and complex spreadsheets for our clients to access. Please contact us if you would like to learn more.
Apple and Android apps:
There are many smartphone apps available which are super convenient for maintaining your expenses as you’re shopping. Previously I’ve written about the free TrackMySpend app. Apart from its useability, what I really like about this app is that it encourages you to distinguish your purchase entries between wants or needs.
A more comprehensive app is iExpenseIt is available on iTunes in a free or paid version. The free version is completely suitable to just capture expenses, whilst the paid version offers more complete cash management functionality (that is to say, it offers more than this exercise requires, but may be attractive to people who are comfortable with technology and intend to use the app for purposes beyond capturing expenses). iExpenseIt allows you to maintain separate records for multiple bank accounts, credit card accounts and cash on hand.
An excellent Android app called EasyMoney is possibly the most comprehensive and easiest to use of these recommendations. In particular its visibility function of current balances is excellent. Like iExpenseIt, EasyMoney offers much more than simply monitoring expenses and will be attractive to people who are seeking more functionality from the cash management programs. Note also that a free version of this app isn't available, except for a 30-day trial period.
Whilst these three apps are favourites, I’d encourage you to poke around the app stores to research the many alternatives to find one that suits your input, visual and reporting needs – I’m all for whatever keeps you motivated to remain consistent. Just bear in mind, the usefulness of these tools is expanded if you are able to download statement entries directly into a spreadsheet.
Written Spending Journals
Some people (hello Mum!), have great success in monitoring their expenses by maintaining an ink and paper spending journal. If this is your preference, it’s essential to methodically record your spending in the one location (that is not across a series of bits of paper quickly shoved into a folder). You will also need to ensure there’s room alongside the entries to identify fixed and discretionary spending, along with category identifiers when it comes time to do your review/analysis.
What are the Benefits of Capturing Spending?
Recording all your spending, no matter how small, builds your knowledge and has the capacity to influence your behaviour. For example, the excellent coffee at the café near my old building cost $4, and running out to get a coffee a few times a day fulfilled a dual need for a coffee fix, and a break from the office. 2 coffees a day, over a 20-day workday month totals $160, or $1,920 per year. Even for coffee purists, at that cost, finding alternatives for caffeine hits/ office breaks starts to look attractive.
Aside from gathering important information to develop your roadmap to financial autonomy, commitment to recording your expenses will:
- heighten your awareness (put in link) of how you spend
- alert you to your cash situation throughout the spending cycle;
- develop your understanding of how a purchase impacts your future capacity to spend;
- toughen up your decision making/approach to discretionary purchases.
Finally, there may be occasions when you forget to record some expense details – when this happens, enter a balancing entry or difference as 'unknown'. Better to have some anonymous entries than to decide that it’s ‘all too hard’ and reduce your ongoing efforts in monitor your expenses.