Tracking Your Finances

So, you’ve made the choice to come up with a financial plan, but how is the best way to put it down on paper and then track your progress?

I think having a financial plan is just the first step. You also need the discipline to stick with it and a means to be able to figure out what you’re spending your money on.

I use a two-step process to track my finances and my financial plan – I use a spreadsheet to calculate a cash budget for the next year or two, and then I use financial software to track my day to day spending.

My yearly spreadsheet is great because it shows what expense I have coming up and allows me to properly plan for them – this way, there are no surprises and I always know how much money I’m going to need.

I use Microsoft Money to track my income and expenses each month and it gives me the detail I need to make proper spending decisions.

For example, one month, I ran a report and noticed I was spending too much on going out. I quickly made changes and decided not to go out for a while to get me back on track.

I think if people actually would track their spending in detail, they’d be surprised how much they spend. A friend of mine in New Jersey decided to count how much he actually spent on road tolls each month. To his shock, he was spending over $100 each month!

After finding this out, he realized why his account was always on empty and made some changes in his driving patterns to reduce the amount of tolls he paid.

It does take a little bit of numerical aptitude to use the software, so if you’re not sure get someone to help you or pay someone to do it for you.

I also use my financial software to track the performance of my investments. It can track your return for the year or from the time you bought an investment. If you see that some of the performance is lacking, it may be time to dump some of the dogs in your portfolio.

To summarize, creating a cash budget a year or two in advance is a great way to see what expenses you have, and to remind you if anything big is on the horizon.

Financial software can help you track the details and will sound the alarm if your spending is off track.

I think too many people are broke and don’t know why. They always come up with excuses or live in denial, but at the end of the day, there usually is a reason why there’s no money in their bank account.

Remember, the numbers don’t lie.