A few years ago I started tracking my personal expenses closely. I did this because I was starting my business, and wanted to make sure that I had the cash flow available to make it work. For most people, budgeting can be done in one of two ways:
- You save first, and spend until your money is gone and your next paycheck arrives, or
- You plan how much you can spend based on your income and expenses and put the savings aside at the end of the month.
For people with large incomes, the save first option works well. For people on a limited income, budgeting every item works better. I like using a combination of the two. First I save, and then I look at my spending and make adjustments. I found software that helps me do this very well. Most importantly, it’s FREE.
With recent economic hardships, there has been an increasing need for personal finance software. I originally started doing this using Quicken Home and Business, but I soon became intrigued by moving my data into the cloud, which is a fancy way of saying online to an internet site. Enter Mint.com.
After reviewing two different budgeting sites (wesabe.com and mint.com), I decided to continue with Mint.com. It is a little more popular, and offered stability by being recently bought by quickenonline.com. Wesabe.com offered a neat online social community, where you could socialize with like-minded users, but I found Mint.com a little more user-friendly. How does it work?
First you create an account. You provide an email address and password with security questions.
Then you add the accounts that you want to track. Because my wife and I put all our purchases on a cash back credit card, we can easily track 95% of all our purchases by syncing our credit card and credit union information. You can also add your mortgage and other debt and download three to four months worth of transactions.
Last, you click on trends where you can see your major spending categories. If you have a large amount of transactions that are uncategorized, you simply click on that part of the pie chart until you get to the actual transaction. Then you categorize them. It is as simple as that.
Why start budgeting? Beginner investors might want to make sure that they are using your money efficiently and not sabotaging their goals. Seasoned investors nearing retirement might want to track their spending to get an idea of their income need in retirement. Retired investors might want to track their expenses so they aren’t dipping into their nest egg. Whatever your reason, budgets are the back bone of personal finance. Having one helps you make conscious decisions to grow or blow your wealth. Happy budgeting.