Last year, I spent $292.89 on fishing, $274.01 on iTunes stuff, and $860.25 on coffee. Could you produce figures like this for how you spend your money? If not, I strongly urge you to start tracking your expenses.
Now, I will admit that this is a bit of an obsession with me. I track and categorize all of our expenses, including our cash expenses. This has caused some discussion in our house, but Mary Jane has been a trouper and has tried to comply with my requests. As a result, we only spend about $10 per month that I can’t account for.
This sounds hard to do, but I can tell you is is not that bad. I have used Quicken for the past 10-15 years, and it is truly the most useful software I own. It takes no more than 10-15 minutes a week, and it provides great insight into where you are financially. Most institutions will provide your transactions in a way that can be loaded directly into Quicken, so data entry is at a minimum. But there are a few tips that make managing your financial life easier.
First, charge everything. This applies to gas, food, restaurants, and pretty much everything that you buy that costs more than $5. You will have a record of your purchases, you will get some sort of reward points (if you get the right kind of card), and your transactions will flow into Quicken very easily.
Notice I said “charge”. Use a charge card, not a debit card. Now, I know that some people have trouble with charge cards and have trouble paying the full amount due at the end of the month. Certainly, if you are one of these people, look elsewhere for advice. But if you can pay in full each month, get a charge card that provides great rewards, and throw away your debit cards. There are far greater consumer protection laws for charge cards than for debit cards, at least in Massachusetts.
Second, try very hard to jot down your cash transactions. In fact, you should really not be using cash very much at all. And periodically, compare your cash to what Quicken thinks you should have. This will tell you how good you are at recording those cash transactions. Just adjust your balance and strive to get better next month.
If you stick to this program, I guarantee you will have at least one “Holy Crap!” moment. “I spent $860.25 on coffee!” You will either become comfortable with this level of expense, or you will find ways to cut it down.
Finally, if you ever plan to retire, these sort of records will be invaluable. Now, time for a coffee.