Thursday, 31 December 2009 20:27
Last Updated on Sunday, 24 January 2010 16:03
Provided by Erin Baehr, CFP
“What’s in your wallet?” So goes the question on the Capital One credit card commercials. Some of us may answer “a hole!” because the money seems to drain out. But where does it go? There’s just not enough time in the day to get everything done, and the dreaded chore of keeping track of the finances ends up pushed off again, leaving behind the nagging feeling that you should be doing something about it.
But who has the time or discipline to write down every penny that gets spent? I sure don’t and I’ll guess you don’t either. I don’t believe that tracking the minute details of our spending is necessary. I do however believe you need a general idea of where things go, and that each partner in your finances should have a handle on it too. As my friend Ken Robinson points out in his (highly recommended) book, Don’t Make a Budget (www.dontmakeabudget.com), the purpose of knowing what you’re spending is not to make you feel bad about it, but rather to make you aware of what you’re doing so you can be intentional about using your money according to what you value. That may mean choosing to make fewer trips to the drive-through because you want to save it for something more meaningful. There may be categories in your family that are important for you to track more closely than others. For me, tracking gasoline and groceries is important, because those are places that I tend to get lazy and spending can creep up. During one busy period recently, I wasn’t paying attention to how often I was driving our SUV instead of the more economical car, until I saw how much we had spent on gas. While the SUV is more comfortable, it isn’t worth the extra cost to me to drive it every day.
There are many different ways to track your spending, from paper budget worksheets to software programs to budgeting websites. No one way is the best; the important thing is that it works for you. If you like paper, the Crown Financial Ministries website has printable budget sheets you can use (www.crown.org). Paper systems are simple and easy to get started, but can be cumbersome as time goes on and complexity grows. As far as software programs that reside on your computer, the two big players have been MS Money and Quicken. I’ve used both and prefer MS Money, but unfortunately it’s being phased out next year. They are essentially electronic check registers, with budgeting and reporting capabilities. Both allow you to import transactions from your bank accounts and credit cards, which can be a huge time saver. Once your transactions are categorized (remember they can be as broad or narrow as you like), spending reports are easy to generate. A nice thing about these programs is that you can delete or change amounts if errors are made. I like to make dummy entries in the register for upcoming expenses to keep a handle on cash flow, and then delete them when the actual transactions occur.
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