“What’s in your wallet?” So goes the question on the Capital One credit card commercials. Some of us may answer “a hole!” because the money seems to drain out. But where does it go? There’s just not enough time in the day to get everything done, and the dreaded chore of keeping track of the finances ends up pushed off again, leaving behind the nagging feeling that you should be doing something about it.
But who has the time or discipline to write down every penny that gets spent? I sure don’t and I’ll guess you don’t either. I don’t believe that tracking the minute details of our spending is necessary. I do however believe you need a general idea of where things go, and that each partner in your finances should have a handle on it too. As my friend Ken Robinson points out in his (highly recommended) book, Don’t Make a Budget (www.dontmakeabudget.com), the purpose of knowing what you’re spending is not to make you feel bad about it, but rather to make you aware of what you’re doing so you can be intentional about using your money according to what you value. That may mean choosing to make fewer trips to the drive-through because you want to save it for something more meaningful. There may be categories in your family that are important for you to track more closely than others. For me, tracking gasoline and groceries is important, because those are places that I tend to get lazy and spending can creep up. During one busy period recently, I wasn’t paying attention to how often I was driving our SUV instead of the more economical car, until I saw how much we had spent on gas. While the SUV is more comfortable, it isn’t worth the extra cost to me to drive it every day.
There are many different ways to track your spending, from paper budget worksheets to software programs to budgeting websites. No one way is the best; the important thing is that it works for you. If you like paper, the Crown Financial Ministries website has printable budget sheets you can use (www.crown.org). Paper systems are simple and easy to get started, but can be cumbersome as time goes on and complexity grows. As far as software programs that reside on your computer, the two big players have been MS Money and Quicken. I’ve used both and prefer MS Money, but unfortunately it’s being phased out next year. They are essentially electronic check registers, with budgeting and reporting capabilities. Both allow you to import transactions from your bank accounts and credit cards, which can be a huge time saver. Once your transactions are categorized (remember they can be as broad or narrow as you like), spending reports are easy to generate. A nice thing about these programs is that you can delete or change amounts if errors are made. I like to make dummy entries in the register for upcoming expenses to keep a handle on cash flow, and then delete them when the actual transactions occur.
Online budgeting tools are a fairly recent addition, with mint.com and yodlee.com being the most well known. While they don’t keep track of your bottom line like a check register or Quicken type programs, they are good for seeing in real time where your money is going. These are similar to using your bank’s online banking, where you can see what was spent (not what’s outstanding) but they show all your transactions together—checks, debit purchases, credit card transactions, and all. When you set up your online account, you are asked to search for your financial institution or type in the web address, and provide your username and password. You can do this for your banks, brokerage accounts, credit cards, car loans, mortgage, and more. Once you provide the login information, the site regularly pulls in your transaction information and aggregates it, so you can see at a glance what you’ve spent and where. You can compare your goals vs. reality for your categories, and also receive warnings or notifications by email. In the beginning you have to do a little tweaking of the categories it automatically assigns, but they are surprisingly accurate. What’s nice about these is that both you and your spouse, or anyone else you share finances with, can login and see where your finances are, making it easier for the less involved one to be aware of what’s going on. Each site has its own unique features, which may or may not be attractive to you. Yodlee has a financial calendar feature that shows due dates as well as the transactions for each day, right on the calendar. Mint.com and Wesabe.com have mobile and iPhone applications. Greensherpa.com and Cashflowinsite.com both allow you to share your accounts with an advisor, plus have the added advantage of allowing you to import transactions from banks that don’t have compatibility with online tools. While trying these out, I’ve come across several banks that won’t sync automatically so being able to import is a nice feature. With the other sites you can manually enter accounts and update them yourself—not something I ever get around to doing however. Quicken.com also offers an online version of their program. All of these sites are free, with the exception of Greensherpa, which charges $7.95 a month (free trial available). Another online budgeting tool is mvelopes.com, which is based on the envelope system of budgeting, where you separate your income into various envelopes assigned to your categories, and when the money in that envelope is gone, it’s gone. I have tried mvelopes, clients have tried it, and none of us have been able to make it work simply. There is an annual fee for mvelopes , about $130 a year. Disclaimer: assess the security features for yourself before providing your personal information; I make no warranty as to the safety.
While we’re talking about keeping money in our wallets, I’d like to mention a couple of sites to help you do that. The first is Suze Orman’s “Save Yourself” campaign, to get people to save more. If you open an account with TD Ameritrade through her www.saveyourself.com site, you can set up automatic monthly transfers to an FDIC insured account of $100 each, and after a year you’ll get a $100 bonus. Not a bad return. Wachovia has a similar program, where they pay a higher interest rate plus a bonus on automatic savings, according to their qualifications and limits. PNC’s new Virtual Wallet account is a neat way to teach kids about spending and savings accounts. Upromise.com has helped me pay for college tuition; it’s an effortless way to get cash back deposited into a 529 account. Register your store reward cards on their site, and register your friends and family’s while you’re at it. Using their credit card (responsibly paying in full each month of course) gets you more cash as well. You can find financial tools and tips on my website, www.baehrfinancial.com , including a free newsletter, workbook, and financial roadmap.