Sunday, January 25, 2015

How I Keep Track of My Money

As a major snowstorm bears down on my area on this late January Sunday, I've been doing some lazy day catching up, including making sure I've gotten all my bills paid for the month. I have a very simple, cost-free way to do this that I've worked out over the past eight years. I is just a simple set of Google spreadsheets where I collect all my data. You could do this on paper, but I like that this adds and subtracts everything for me so I don't have to use a calculator (or worry about addition mistakes).

The less money I have, the more important it seems to be to keep good track of it! And with all the hacking and scamming going on out there, the more important it is to check your accounts often - bank, credit cards, and so on. The easiest way I've found is to do it all online. I check my upcoming bills and bank balances weekly, and credit card stuff two to four times a month. That way I can jump on problems quickly, and make sure I'm never overdrawn, overdue, or over limit. Banks make a ton of money off late fees, overdraft fees, and so on. I'd just as soon they don't get any of my money, thank you very much.

Now, over the years I tried out all kinds of the software for keeping track of my money, bill payments, savings, etc. Microsoft Money was probably my favorite, but it got clunkier and more confusing over the years, as it got more complicated. And it took up a lot of time to keep it current. It was weighted down with a many features I did not need.

At some point I decided to just set up a Microsoft Excel spreadsheet to keep track of my finances. I started with one sheet for the current month and then added a sheet for each succeeding month. As time went on, I added more features, made changes, added some colors. It's still very simple, but it's fast and works very well for my admittedly simple finances. A few years ago I transferred it all to Google Spreadsheets, so it's all online. I keep a year's worth of spreadsheets in a single workbook, and then start a new workbook each January by making a copy of the current workbook and then changing the dates and updating.  Here's a sample page:


Below this most-used portion of the spreadsheet, I have sections for other bank accounts and even cash (although I haven't been keeping that current - I don't use cash much). I feel guilty about that.

This allows me to capture and predict the bills I have to pay each month. When I start each year's workbook by making a copy of the past year's, things like annual property taxes, insurance payments, and quarterly utility payments are automatically in the correct month. I then erase all the checking account entries from the past year, and adjust for any changes that have occurred since last year - new bills, new monthly amounts for internet and newspaper for example. Some bill amounts I won't know in advance, like utility and credit card bills. But at the beginning of the month I check each account online and predict, and then fill in the "official" amount when the bill arrives.

I also predict how much I think I will spend on the usual stuff: groceries, gifts, etc., and the spreadsheet adds this to the predicted bill payments, and puts the total in "estimated total outgo". The following "actual" field keeps track of all the expenditures from checking. Then the "difference" field shows me how much more I have to spend, or by how much I've exceeded my estimated budget.

The checking section is maintained regularly, with each check, check card purchase, or other electronic payment from checking entered, along with the date and what the payment was for. The amount shown in the header, right of "starting balance," is the account balance at the beginning of the month. I also enter income, such as my Social Security check and anything else that happens to show up, in a separate column just right of the column for expenditures. Every week I log in to my bank's website and check off items as they appear (in the "x" column), and balance their total with mine. The column to the left of the "x" column is my checkbook total. This way I can keep my checkbook balanced and up-to-date, as well as check for any charges I failed to enter or even bogus ones.

I also enter into the check list bills that will be paid later in the month, even amounts that are only estimated (I change them to the exact figure later, when the bill comes in). The amount shown in the header just right of "date" is a predicted account total for the end of the month, minus groceries and other miscellaneous debits from shopping, for instance, as it incorporates the predicted future entries, both expenditures and income. 

Another thing I do now, to keep track, is to add in credit card purchases in the top section of next-month's spreadsheet for each card. I always pay off credit card balances in full, so this lets me keep track of what my upcoming credit card payments will be.

Whew! Seems complicated, but it really isn't. For me, it's lightening-fast and makes balancing my accounts a matter of just minutes. Because I built it, I can change it any way I want. For a while I added columns to keep track of what I was spending on food, pet expenses, and other household expenses. It's been easy to go back and find specific information I've needed, too. It's maddening, though, to go back and see how much my Comcast bill has gone up over the last few years!

This method wouldn't be for everyone. I'm retired and don't have a lot of investments or other complications that the big financial software programs are really built for. I don't even have to itemize deductions, so record keeping for tax purposes is no longer an issue. But because I have dates and payees, and I save my receipts, it's easy enough to go back and retrieve information for purchases or other expenditures. You don't have to be a spreadsheet whiz to use this kind of system, as it uses only very simple summation formulas. You could make the spreadsheets do much, much more if you wanted to.

I've found that this easy little method really has allowed me to achieve more control over my money and how I spend it. I haven't paid a bank fee or even any interest in years! I can see right away when I'm spending too much in a given area. I always know where my money is and what's coming up. And since use of Google Docs is free, as is Google cloud storage for documents and spreadsheets created in their formats, it doesn't cost me a thing! This is what I really like: frugal AND better.

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