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Take Control of Your Finances Part 2: Track Your Money

This article was written by in Money Management. 8 comments.


After deciding that it’s time to get a handle on your finances, find a way to accurately track the way you handle everything involving money. Before deciding to take action, you may have estimated your income and expenses, but now the details matter. Here is how to get to the details.

Every cent is important at this point. That will change later on; as you grow as a master or mistress of your money, you can ease the pinch on the penny. But in the beginning of this journey, you should record everything. From the $5 check from your grandmother on your birthday to your $75,000 annual performance bonus, and from the $1.99 music download to the $28,150 car, you must write it all down in some form.

There is a purpose to this madness. By tracking every detail of your money, you get a real picture of how much you’re spending. Many people don’t know off the top of the head how much they spend on lunches with coworkers every month or how much they spend on cigarettes or coffee. This process can be very enlightening, and in some cases, it might provide motivation in itself. By tracking your finances accurately, you’ll be poised to make better decisions about where to spend your money.

You don’t need to start with fancy software. Sometimes, low tech can be most effective, especially when starting out. Pads and pencils are portable as well, and they are great tools for keeping track of your cash spending while you’re on the move. The first step is to choose the method that will work best for you.

Desktop software

Intuit Quicken is the king of financial tracking software. Unfortunately, the software is not cheap. Quicken 2009 Deluxe, the most basic version available this year, costs $45 through Consumerism Commentary. You can connect to banks to download your deposits and withdrawals and credit card companies to download your charges and payments. Microsoft Money Plus is another option offering similar features. Both of these programs cost money to use. For those who don’t use Windows-based computers, MoneyDance is a good choice, but this software is not free, either.

If you’re looking for software that is free to use, take a look at GnuCash. GnuCash also has a portable edition which allows you to take your financial data with you and access the program anywhere you can jump on a computer. (Thanks to Dave Stinner who reminded me about Gnu Cash.)

Web software

Quicken Online Edition is now free. Here’s a review of the service. Mint (reviewed here), Geezeo, and Wesabe offer similar features to help you track your money.

While web software offers seamless integration with online access to your banks, it has some limitations. These web applications are not designed to keep track of your cash spending, which may be the most important requirements for accurately tracking your expenses.

Mobile software

Keeping track of the money you spend while you’re out is a challenge, at least for me. It helps to ask for receipts for all transactions so you can collect them and record the amounts at night when you’re home. I’m experimenting with software for mobile phones that allows you to keep track of your spending. SplashMoney works with my BlackBerry as well as iPhones. For Quicken users who enter transactions while away from the computer and sync them to desktop Quicken later, Pocket Quicken may be a good option. This software runs on Palm and Windows Mobile devices.

Paper

For people who prefer old-fashioned methods and have unlimited filing space, paper accounting is an option. Download this ledger paper and print a few pages. Use a separate page for each account, and keep track of your transactions just like you would with software. If you don’t like my ledger paper, try these templates, available for free.

Tips for accurate accounting

  • Collect receipts for all transactions, including the purchases using cash. “Cash” should be an account in your software or on paper. Your starting balance is amount of money you have in your wallet on the day you begin tracking.
  • If possible, keep notes about your expenses while you’re away from your computer or desk. Carry a small pad or use mobile software like those listed above.
  • Every month, or more often if you have online access or automatic transaction downloads, compare what you record with the activity your bank has recorded in their systems. This “reconciliation” ensures you have accurate records for your bank accounts, investments, and credit cards.
  • The web software listed above usually download your bank activity automatically. In some cases, the application will try to categorize your spending based on the vendor name or similar transactions by other users of the software. This “artificial intelligence” will make errors, so review every transaction to categorize the expenses and income properly.
  • ATM withdrawals should be recorded as a transfer between your savings account and your cash account, not an expense. Cash deposits should be transfers as well.

As time goes on and you become more familiar with your finances, you can afford to be less aggressive about recording every cent. I suggest following the above suggestions and keeping track of everything for at least several months to get an informative view of your money.

If you have any additional tips for tracking your money accurately, please share.

Image credit: Refracted Moments

Updated June 23, 2014 and originally published November 14, 2008. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 8 comments… read them below or add one }

avatar Dave Stinner

Another option for desktop software is GnuCash. It runs on Windows and Linux and also has a Portable Apps version. It’s also completely free.

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avatar Luke Landes ♦127,475 (Platinum)

Dave: Thanks! I’ve added GnuCash to the list within the article.I’ve used GnuCash — it was a good choice when I didn’t have money to spend.

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avatar Craig

Great post and you have listed a lot of excellent options that people will be smart to take advantage of to help their money management. I would like to introduce you to another web tool called BudgetPulse. No downloads, no security risks. And it’s FREE!

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avatar Mark

I record all my expenses in a Google Docs spreadsheet. Every spreadsheet covers one month. I list the dates down the left-hand column. Then across the top row I create headings such as transportation, meals, snacks, pop/juice, laundry/dry cleaning, grocery, clothes, etc., and create three Other categories (Other 1, Other 2, Other 3) for things that wouldn’t fit elsewhere, like a Sunday newspaper here and there, dental copays or prescriptions, the trip to Target for misc. items, and etc.

Along the far right column, I create =sum(a2:r2) formulas in each cell for each date to add up each day’s expenses in one spot, and likewise at the bottom row I create similar =sum formulas to add up each category’s expenses. So for example, I can tell at a glance how much I’ve spent this month eating out, or how much I spent in one day taking the bus downtown to buy some clothes and eat out.

At the end of each month, I just do a Copy Spreadsheet to create a new one for the next month, kind of like a template. It takes a few minutes to re-date, clear out all cells, and so forth.

It’s easy, accessible from anywhere I’m online, and free!

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avatar Suburban Wife

Flexo,

Great article. I couldn’t agree more that knowing where your money is going is a critical step in taking control of one’s money.

One desktop program that deserves to be on your list is a program called YNAB — You Need a Budget (www.youneedabudget.com). YNAB is currently available only for Windows; a Mac version is said to be in the works. The software is not free but so far all upgrades have been once the initial program is purchased.

I’ve been using YNAB for a year now and it has literally changed my life. The great ability of YNAB over other programs (like Quicken) is that it can be used to either track past expenses or establish a live, working budget (in reality, it does both) depending on where one is in their financial-control evolution.

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avatar George

While it’s not free, Fortora Fresh Finance is another great personal finance manager for the desktop (and a great alternative to Quicken in my opinion). It’s super simple to use, has excellent licensing terms, and it’s available for both Windows and Mac. You can find out more at http://www.fortora.com

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avatar Jeremy

Before I entered the world of Quicken, I was an Excel devotee. Excel can work really well once it’s set up to your liking, but it always takes some time when you need to do steps like importing your credit card data. Quicken is a slick, push-a-few buttons solution!

I do really love Excel though. Excel is to Quicken as a 21 speed mountain bike is to a Razor scooter. Excel is powerful.

(Disclaimer: I still use Excel for some things. I guess it’s like an old school security blanket! Except it doesn’t keep me warm at night; that’s what the laptop battery is for! I’ll go all Web 2.0 soon, I promise.)

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avatar Mary

If you happen to be both a diehard PalmOS user AND a Microsoft Money fan, you can’t go wrong with Ultrasoft Money. I’ve used it for at least four years and have never ever had a problem syncing. It works flawlessly.

(Just discovered this site via Get Rich Slowly, by the way.)

Peace
Mary

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