Thursday, August 26, 2010

Keeping Track of Your Money

If you follow any of the mainstream personal finance advice about getting out of debt there seems to be one recurrent theme between all of the individual PF advisers: SPEND LESS THAN YOU EARN.

This mantra is valid and absolutely necessary to success, but it is lacking. It provides a way not the means. It is simple to say to spend less than you make, but if you are in debt up to your eyeballs you probably have built some pretty terrible money habits, the greatest of which is poor record keeping. How can you realistically expect to spend less than you earn if you do not keep track of every transaction that takes place.

Now this concept is related to but distinctly different from budgeting. Budgeting is deciding in advance where your money will be spent. IN ORDER TO BUDGET EFFECTIVELY, YOU MUST KEEP METICULOUS RECORDS.

During the last few months I have come to the conclusion that simpler is better when it comes to record keeping. Personally, if it takes too long I won't do it. This is why I have not written a single transaction into my check register for the last 5 years (and was intermittent at best before that).

The system that my wife and I have settled on is one that I built using Microsoft Excel. It is a two pronged system: a simple monthly budget and an electronic checkbook register that allows me to track every transaction that passes through our accounts.

Before deciding to build my own check register in Excel I looked around on the web to see if there was a template I could use that would be easier than building my own. There are a lot. The problem I had with every one of them was that I have more than one checking account.

In my situation I utilize two checking accounts and one savings account for most of our transactions (this does not include the online savings accounts for our "emergency fund" and the savings accounts I have set up for our children.) This means that using a generic Excel template to track my transactions I need no less than 3 files or sheets in a file to accommodate my personal situation.

I have been keeping individual check registers for all three of our main accounts. I had been keeping registers for our other accounts but stopped since it became too tedious. This is a problem. Since I stopped keeping track of our online savings account I have noticed that the balance has been shrinking over the last few months since we are no longer held accountable by tracking every transaction!

The solution? Build a better electronic check register! I call it Easy Register. It allows an individual to keep track of up to TEN accounts all within a single check register. I have plans in the future to upgrade it to include a budget feature and allow for categories of transactions so you can extract useful data from your expenditures, but for now I feel that this spreadsheet will be a useful tool to help people get on the right track (ha ha, no pun intended).

The spreadsheet is pretty self explanatory, but if you have any questions please feel free to email me. I would love to help.

As a side note, each sheet within the file is protected, but not with a password, so please feel free to play around with it if that is your bag!


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