Back when I was really, really broke, I kept running out of money and didn’t know quite why. I decided that the best way to know where my money was going was to write it down. So, I got and kept a receipt for every purchase I made and entered it all in a spread sheet. While tracking my spending didn’t increase my income, after a month or two I was able to see where I could cut back and where exactly my money was going. I was able to make better decisions and felt much more in control of my pennies.
Since those days I have discovered that it doesn’t matter if a person is trying to lose weight, increase test scores in the classroom or manage their finances. Keeping records is the most valuable way of having cold, hard facts from which to make decisions. And this from a gal who hates paperwork and prefers her data qualitatively. Numbers matter.
There are many, many tools on the market for a person to use. I understand that Microsoft and Quicken both make products that will organize and categorize your spending. There are even little receipt scanners that you can hook up to your computer so you don’t have to type stuff. I have also noticed that my bank now allows me to add notes on to my checks on-line. All of these are good options but I much prefer the ease, privacy and control of a basic spread sheet. If you are scared of spreadsheets, try a class at your local library or ask a teenager to help you. Once you have the basics of the sheet set up it isn’t hard to maintain.
To start with I locked the right column of the sheet (use the help option to find out how to do this for your spreadsheet program) to become my category list. I have fixed expenses like my mortgage, gas, electric, and monthly insurance first on the list. These are bills I get that are usually about the same each month. I then have the items that change from month to month like food, clothing, postage, haircuts, and gifts. I then have a group of expenses I pay now and then like my vehicle and home insurance, fees for organizations, and my tax preparer. You can decide what categories you need as you go along by adding new rows to the sheet. Be as specific as you need to be in order to make good decisions for yourself.
Each new column is the spending for a month. As I spend money and collect my receipts, I tuck them in my wallet and about once every two weeks I enter them in to the spread sheet as a formula. It sounds awful but isn’t. A formula in Excel looks like this =(#+#+#-#) and then POOF! it does the addition and subtraction for you. At the end of the month, you can see what you have spent.
If you are half of a couple, you may want to have separate lines for each of your hobbies or work expenses. If you have children, you may want to know how much you spend for clothing on each one. It’s your spreadsheet, do what works for you.
Besides knowing where my money is going, tracking my spending this way has also helped me in three other ways. The first is that when I was putting money in to my health care savings account, I had the receipts to get the money back out before the end of the year. The second area my little spread sheet has helped with is tax time. I no longer need to estimate what I spent on things I can deduct. After I enter the numbers in to the spread sheet, I tuck those receipts in to a file folder marked “Tax junk” and they are all there waiting for me in January, no guessing required. I have also been able to decide how much I can afford to spend on new purchases. When I think about a different car, I can add up my monthly expenses, subtract my income and see just how much I can afford to send each month on a payment.
I am sure that once you find a money tracking method that works for you, you will be better equipped to make financial decisions.
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