If you were to ask me, “what’s the most important thing I can know about money?” this is the blog post I’d show you. This lesson here is right up there with “spend less than you make” and serves as the cornerstone of any financial plan: track your spending.
I’ve known this was important for years. I’ve always managed to earn more than I spent, but I had no clue where the money I spent actually went. I had a budget, of course, and like many people, I struggled to do it the old-fashioned way, the analog way, (dare I say it?) the Dave Ramsey way — on paper. Actually, I used a spreadsheet, but it was just as useless. I’d start the month with enthusiasm, jotting down every expense in a mock checking register. Then, after a week or two, I’d have some trouble keeping up. I’d forget to include one expense or another and the register wouldn’t balance with my checking account. Nor could I figure out how to total how much I spent on groceries, eating out, or any other category from my budget. I’d get frustrated and eventually give up. This just wasn’t my area of expertise, and no matter how hard I tried, every month it felt like I was still guessing at where my money went.
Around 2008, I finally managed to find the solution in a website you might have heard of: mint.com. It’s owned by Intuit, the developers of Quicken, and it’s one of a handful of web-based account aggregators. It links with your bank account, your credit card, and anyplace else you put your money, and it does automatically what I was trying so hard to do on my own — track every expense and categorize it, showing you how much you spend every month and where. It was fantastic — I now had an air-tight grasp on my finance, and not a penny wandered off unnoticed.
In the process, I discovered that I was blowing my grocery budget apart by shopping at the convenient, albeit expensive HyVee across the street. I started shopping at Aldi instead and managed to cut that expense in half. When I describe Mint to my friends, they often ask if I worry about cyber-criminals breaking into my bank account. It’s understandable — all my bank accounts are currently connected to one site. I believe, however, that Mint.com helps keep my finances more secure, since it makes it easier to track every expense. Here’s an example: a few years ago, I saw that we had a couple unusual charges at a Walmart in Knoxville, Tennessee. Those might have gone by unnoticed if they’d been crowded into a checking register with a hundred other expenses, but because I saw we were suddenly over budget in our “shopping” category, I knew something was wrong. It turns out a criminal had duplicated Vivian’s credit card and was having a shopping spree with it. We put the charges in dispute, got a new credit card, and never lost a dime.
If you have trouble figuring out where you money goes every month, I suggest giving a program like Mint.com a try. It’s a free, ad-supported website, so you risk nothing giving it a try. There are other sites like it, of course — one being yodlee (I’ve never used it before, but it’s also free). Another site called mvelopes may also be worth a look (though it is not free).
Of course, if pen and paper works for you, keep at it. If you’re like me, though, it’s nice to have a little help from a free, digital assistant online.