Money Tracking the Exacting Way

Photo credit: crowncanada.ca

Photo credit: crowncanada.ca

I have written a few posts about budgeting and finances, but I haven’t posted yet about my financial tracking and record-keeping system. So here goes!

In the last quarter of the year, I do a projection for the following year, month-by-month. Now that it’s almost September, I am itching to have a go at 2014 and see what it will look like! My finances have changed dramatically in the last 5 years because of major life changes: getting married, college savings, a child leaving home, savings for travel and retirement, and the introduction of TFSAs.  It would never occur to me to continue with an old budget because every year is different from the last!

Looking at each month of next year laid out in a spreadsheet, I can see which months will be tough because of big annual bills coming due, and which months will be light and allow for savings.

The steps I take are:

  • Record my starting balance in every account including cash at hand
  • Note my expected income by month
  • List all of the predictable bills and their average monthly amount (such as the power bill)
  • List all of the irregular bills and their expected amount (such as car maintenance)

I plot these first and see what is left over.

Next I list all of the variable bills such as groceries and home heating, and give them a monthly budget. I do this using info I’ve collected over the past year about my actual spending, and make a projection. I try to be realistic – I am not going to turn the heat down to 15 in the winter!

Then I set savings targets. I save a high amount for retirement, and a medium amount for travel to see relatives.

After that I budget for things that are essential “over the long term” but are very flexible, such as clothes and gifts.

Finally, I add in the things that can be completely chopped if necessary, such as buying annuals for the garden, or buying music on iTunes.

Since I entered my starting balances, I can see what my balance will be at the end of every month in the upcoming year, if I stay on budget. I can even see my year-end cash balance, for example, I’ll have $1300 left over at the end of 2013 if I stick to my plan!

After creating the budget, I know at a glance things like:

  • I’ll be able to save for a trip from June to September, when I’m not paying for heat
  • I’ll buy new tires when I have a “3 paycheque month”
  • I won’t be able to replace the roof this year
  • I can accommodate the 7% increase in the water bill by attending one less concert!

All that is just a paper exercise compared to actually tracking spending. This year I decided to carry enough cash for groceries and gas for the car. Previously, I was being hit with a lot of debit charges from my bank. To make myself accountable, I ask for a receipt for everything, and if none is available, I write down what I spend. I tuck all the receipts and notes into my wallet, and twice a week, I enter them into my money software. Once a week, I check my bank balances online and make sure they match my own records, paying attention to payroll deposits and automatic deductions. Twice a month, I pay bills online that need to be paid manually. And once a month, I reconcile all the accounts.

The money software I use doesn’t do any forecasting, so I enter each month’s figures into my forecasting spreadsheet and compare my forecast to the actuals. I also make a little list of all the frivolous or unexpected spending I’ve done each month so that it’s staring me in the face! It helps me see trends – such as, I bought 5 books this year and haven’t read any of them yet – time to squash that habit!

I am trying to get rid of paper statements and bills, and they are gradually dwindling. I look forward to the day I don’t have file folders of paid bills!

One thing I need to do is schedule an annual review of investments, and an annual comparison shop for things like car insurance, Internet providers and heating oil delivery.

Mint. Photo credit: zdnet.com (not my data!)

My biggest problem right now is that I am using an old software program for tracking my spending, Microsoft Money. I would like to use an app such as Mint, but I have two issues with it:

You have to enter your banking user name and password to give it access to your accounts. This contravenes your agreement with your bank that you will not share your account information with anyone, and therefore, the bank will no longer cover unauthorized transactions. It appears that Mint is very safe – no money can be moved around using the app. But you are still breaking your cardholder agreement with your bank.

If Mint stores your data on American servers, it is subject to the Patriot Act and can be accessed by the US government. While I have nothing to hide in my financial history, I would rather not make it available, either.

It looks like my best option would be updating from my old copy of Microsoft Money to a new version of Quicken. I hear they have an app, but it’s still somewhat buggy! I don’t think I could give up financial software and just use spreadsheets because I like the software reports too much.

What works for you?

34 comments

  1. Wow I didn’t know about the violation of the bank’s security – given my bank runs a ‘tracking’ style program importing data from any banks you give it the credentials for.

    It doesn’t surprise me to hear your thorough approach – I have at times tracked every dollar, but it’s not really 100% my nature, so once I had a few months data, I could confidently set a budget and work within that (usually). I get out $XYZ cash per week for all expenses – groceries, coffees, meals out etc. Haircuts also come out of that, or any beauty treatments. Of course that figure doesn’t represent what I have left in the bank – which I’ll dip into for a bill (or transfer from the bills account) or something beyond the amount above. Usually, I have money left at the end of the pay cycle and that gets saved. And I think you’ve come to see, what’s saved in the big bucket, I hate to dip into, but know that I have it for a reason. Thankfully, it’s back to where I’d like it to be with my tax return coming through.

    • I also have savings I can dip into if I have a cash flow problem. Probably the best solution would be to have 3 or 4 savings accounts – one for long term, one for travel and home reno and other goals, one for emergencies, and one that is just a “smoothing” account for getting through cash flow problems!

  2. I’m all about pen & paper… lol! I’ve tried various APP’s and I always “stray”… lol! So it’s a notebook, calculator & pen for me! 😉

  3. I use an iPad app called ‘Money’ by ibearsoft- you have to enter all info manually, so no problem with bank. Not sure if it would be an improvement on Microsoft Money or not, though… I think there is a free trial version..

  4. Fiona

    It’s great to hear how others do their tracking. I do like the idea of carrying cash and staying accountable for it. I always worry that I’ll run out of cash…but then staying within the limit is the whole point!

    • The envelope system is popular too (using an envelope with a pre-set amount of cash for the month’s groceries, for example). But since I update my cash records twice a week, I haven’t used that system.

  5. We have been estimating an annual budget in some detail for years and tracking pretty much everything simply using an Excel spreadsheet. At this point I know what our expected expenses are and can see if anything is out of line. That helped us figure out we had a water main leak one year for example (It is 6 feet underground so you don’t see the problem for some time.) I am finding it hard to stick to our budget in some areas this year such as groceries, gasoline and medical costs. The first two simply have gone up in cost and the third had some unplanned expenses. I only keep general savings accounts and don’t try to separate them based on what they are use for.

    • Quite right, you can’t predict or plan for everything! I only have one savings account at the bank, but in my personal records, I have the savings earmarked for various purposes and I don’t stray from that much.

  6. I don’t use an electronic spreadsheet, but I have all of my payments that come out written down, as well as approximate amounts for regular bills, groceries, gas, etc. That way I can look at the balance and see what is left to come out and check where we are during the month. We also keep several savings accounts to allow us to save for different type items, and I have a CSB withdrawal each month from my pay that I accumulate and use for Christmas each year.

  7. I too am itching to get started on 2014…without wishing my life away of course!

    I start with our household budget (I try to keep it around the same amount every year) I then add planned trips, house repairs and any other saving……after that everything goes to the mortgage (in theory). Retirement saving is taken directly from pay so we don’t have to worry about that.
    I don’t use tracking software, just an excel sheet. I record daily/monthly spending on my phone and then transfer the figures over. I track every penny spent (I’m not sure if this is a good thing, or a bad thing?!)

    I’d love to know of any software you can use for forecasting.

  8. I really need to track my spending better. As of now we have a monthly budget but the categories are kind of wide open (X amount for food; once the money is gone we stop spending but since we don’t track each food expense we really don’t know exactly where the money went).

  9. I love the idea of Mint but can’t get myself to cross the threshold to commit to it because of the privacy and security concerns you outline.

    How I would LOVE not having to spend time entering things in on my excel sheets. Alas, that is the price I pay for the premium of security and privacy!

  10. I use an old version of Quicken (2005 I believe) and I’m looking for something new as well. I don’t have any problems with the program itself, but the software is so old that it will not work on my laptop, only my husband’s computer from 2006. The inconvenience makes me put off recording things, which I don’t like. I stick with it for the “insights” button, which is basically reports and graphs that really hit home. As you said, sometimes I don’t realize how much I’m spending until I see it compiled in one place.

    • Yep, I am still using Microsoft Money 2006 and I have a 5-year-old laptop with Windows Vista. The next time I upgrade I am sure that the software won’t work anymore and I’ll be forced to start again.

  11. I keep all of my receipts and then enter the amounts into iXpenseit (an app for iPhone), then every quarter I enter the totals into a spreadsheet in Excel, which I then colour code for the most expensive and least expensive quarters 🙂 I can also directly compare my weekly spending in each category with previous years to see how different my spending is and whether I need to cut it down.

    I don’t really have a set budget for each category, but I think about whether or not I need to spend money on things before doing it, and that works for me.

  12. Interesting article. Do you plan on keeping this level of intensity of tracking spending for the foreseeable future or is there a level of wealth in which you would be fine with +/- a couple hundred bucks a month?

    • That’s a really good question. Most people track expenditures in detail for just a month or two so they can set a budget based on their actual spending. But I have been doing this for many years and plan to continue. I have the time and I enjoy it. I have a regular salary job and my income doesn’t vary much, but my expenses do, especially when I need to save for major home maintenance projects and travel.

  13. Lisa

    I track every cent spent in an Excel spreadsheet. Software would likely be a good idea and get me into this decade (or the last one at least)! 🙂 I do not forecast or really budget, but rely on always living below our means, which to us has always meant living on one salary and completely saving the other. Those savings then get parceled out to various accounts – RRSP, non-registered, TFSA, emergency fund, travel fund etc. At one time, most of the 2nd income went to the mortgage, which allowed us to pay it off in 6 years. Now that I am taking my career break, the transition to one income only has been painless, although obviously our savings accounts are not accumulating money in the same way (which come to think of it, is a bit painful to the likes of me).

  14. I use Micrsoft Money and it still serves our needs well – but I also do a separate Excell spreadsheet for our ‘Bills’ Budget where I can see budgeted and actual spend in adjacent columns. I also have my savings in Excell table where I put in the savings rate and date fixed until. You seem to have everything well under control.

  15. I never use cash, so my bank’s online banking system works great for me. I categorise all my transactions and it’s easy to keep track that way.

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