Reduce Debt Increase Wealth

Expense Tracking

November 27, 2022 MIsterchuck Season 3 Episode 141
Reduce Debt Increase Wealth
Expense Tracking
Show Notes Transcript

At some point everyone should start tracking expenses and income then finally create and maintain a budget. Why is this important to complete goals, have money for the troubled times, just to have piece of mind overall in life.

Article Link:
https://www.nerdwallet.com/article/finance/expense-tracker-apps By Hal M Bundrick, CFP

Contact: ReduceDebtIncreaseWealth@Gmail.com
Wanting Budget Spreadsheet Place Spreadsheet as Subject
All other inquires place topic into Subject.

Charles McDonald:

Hello, I'm your host, Mr. Chuck, I retired accountant turned truck driver, I reduce my debt in a relatively short period of time, debt reduction to achieve financial freedom takes commitment, confidence, determination, expense tracking, at some point everyone should start tracking expenses and income, then finally create a maintain a budget. Why is this important to complete goals, to have money for troubled times, just to have a peace of mind overall in life. I've already talked about getting started reducing debt, setting your goals, getting familiar with different categories for your budgeting. And that's also for your tracking. And when should you use a debit card versus a credit card? Well, if you're on a debt reduction plan, you've got to quit creating new debt or quit using your credit cards. So you should be using a debit card as much as possible, which is the equivalent of paying cash for everything, or writing a check out your checking account. But basically, your debit card replaces writing that check. And it's a lot easier to use. What is expense tracking? It's just the process of you keeping track of your spending and your income, I say income second, because most people only have one, maybe two sources of income. If you're a couple, maybe three or four, I don't know that there are a lot less income coming in, and a lot more different things going out on your spending. But you need to track everything back in the olden days, pre computers. If you had a checking account, you kept the check register. Basically, that is all we are doing. You're just keeping a check, register and recording everything that you are doing through your checking account through your savings account, and all your credit cards. And in the process of doing that you're placing these spending items, and to a category. And why are you doing that? Because then you can do a report by category to see how much money you're really spending on a weekly or monthly basis. For example, if you groceries or food to go to the grocery store once or twice a week, maybe you think you're spending $200 But if you keep track of it, and you do a report at the end of the week, you'll find out it was really $352 Oh you overspent maybe, or maybe not. But you get the jest of what I'm talking about. So categories are grouped by need first, needs are housing, transportation, food, and clothing.

Unknown:

That's the basic after needs comes your wants. What do you want, that would be entertainment,

Charles McDonald:

buy in major assets as as car, motorcycle,

Unknown:

boat, things like that. And then we have

Charles McDonald:

a category you can call it goals where you set aside money on a regular basis to fund something that you want to do in the future when you can afford it. Well, that's in a perfect world. Most people get started in life and don't do anything. They have no clue how much they could really afford. So they go in and they find out why I want to buy a house because I want to have my own home. So they go maybe to a realtor or some banker or somebody and they ask well how much is your income and then are told well, this is how much you can afford to pay. Now you're gonna trust that person, or no, you're gonna figure out on your own and know for sure. They're probably taking your income and they're probably multiplying it by some percentage, whether it's 25% 35% 38% some number, that they're willing to lend you the money they Based on what you told him, and what did you tell him? He told him what your income was maybe weekly or monthly income, and they figured it out? Did they ask you if he had any other loans? They probably did. He told him you had a car

Unknown:

loan? Did they ask you any other questions? Probably not.

Charles McDonald:

Did they ask you? Are you married? Well, probably did ask that question because they want to know what your spouse makes? Did he ask you how many children you have? Maybe not? Did they ask you how much you spend at the grocery store, how much you spend to repair your

Unknown:

vehicles? Probably not.

Charles McDonald:

So before you get started with doing those type of things, if you're tracking your spending, you can create a report by category, you know how much money you're spending in each category. And you know, you should know how much extra cash that's going into your savings account, if you leave it in your checking account, you're most likely will spend it on something you really don't need. So if you put it in your savings account, you're saving it for a rainy day, and you should have an emergency fund, an emergency fund should have enough money in there to get you through a minimum of three months

Unknown:

worth of expenses. But that's down the road. So we want to know, how are

Charles McDonald:

you going to do this tracking way you can do it manually on a piece of paper, then you can go through that and then add everything up by category manually, which will gonna take you forever. Or you can use some type of a computer app, whether you download it onto your smartphone, or your home computer or whatever you do have some type of application that you can use to do this. Now I have a link in my show notes from the nerdwallet.com Expense Tracker apps that you can refer to if you're interested in these particular types of things. Now, in my case, I do not use any of these applications that are listed in this article. Some of them is because maybe I don't like them. Because I've used some in the past. And they really didn't work for me. Because they're one guy to put in too much information maybe or to be I don't know, I couldn't get reports or I didn't do reports, whatever. But how do expense trackers work. The goal here is to move from a spreadsheet at best or worse, no tracking at all, to some form of collection and categorization of money spent.

Unknown:

Apps can do that. However, they

Charles McDonald:

experience varies widely the most popular apps on the Apple and Android platforms, but you need to test drive a few before you find one you're comfortable with. Well, artless focus on free apps for the most part, you're probably have to upgrade at a small cost to get all the features you want. And they're talking a monthly expense. When I say a small costs, they're talking like 595 A month or 895 a month or a monthly fee. I don't like that. That's one of the main reasons I don't use them. This because they're popular and everybody's using them don't mean that they're the best. What's a list of features features you might want to include? Easy transaction download, automatic logging, a reoccurring transactions, a forecast of your ending balance at some point in time, cash flow, auto cargo, categorization of transactions, especially taxable items. And one real luxury, I'm gonna list ability to scan receipts. I don't recommend that download, because you're gonna have to pay additional fees to hook it up to your bank and to download.

Unknown:

But I don't do that. The app I use

Charles McDonald:

for tracking is more just like a basic check register that's expanded. It's like $9.95 a year. I never upgraded it to anything else. And I manually enter all my transactions. It does have reoccurring transactions that you can set up that I use that makes life easier, but you might have to edit the dollar amount because things change as we go through life. And especially now as inflation you're you never know what your budget amounts gonna be. Even though like I am, I'm set up on a budget with my utilities, but it seems to be changing every day. Couple months now, I don't like that, but whatever, that's the thing. But these are lists of some of the things you should be looking for logging a reoccurring transactions count about does that the auto categorization of transactions, when you go in and you put in the the description, and it pops up and you select it, then it automatically puts in the category for you. So like you're go to the grocery store, and I type in the name of the grocery store, and it knows it's groceries. You got to be careful though, because sometimes you might get gas at that same grocery store. So you might have to change it to fuel instead of groceries. So you gotta just watch out for those type of things. But the best personal tracker apps meant every dollar yn A B Learning Tree intensify true bill, money manager odd row money, I don't know, anything I wallet meant I hadn't used

Unknown:

any of those. None. Absolutely none.

Charles McDonald:

And I've been doing this for a long time, almost my whole life. I've used Quicken, Quicken and the past. To track my check register. I tried to use the budget for either I didn't learn how to do it the correct way. Or I just didn't do it right. Or but generally, I would guess, on what the budget amount it should have been. And then when I would go back and compare it, I was nowhere close. So then I just basically gave up on using it. The method that I have developed to make it easiest way to do this two step process. And the first step is tracking all your spending and all your income and be consistent on your categories. And the benefit for using this app. I use count about.com, the written it's online, I don't have to download it. To my computer, you just log in, you go to the site you log in, it's all secured. I don't connect to my banks. So there's no risk of them finding out my bank information. And I just manually enter the transactions. Now you might be thinking, how long does that take? Once you got it set up and done. If you do it weekly, every pay day, it takes you five minutes, 10 minutes if you have a lot of transactions, but what a lot of my transaction are the same every month. So I've set up reoccurring, so I just look up my reoccurring list, when I log in, that's where it brings you to I select on the things that have already cleared my bank. I know that's not quite right. But it's already out of my checking account. Because I'm always behind on entering and personal real life, you should be entering it as the due date. But since I have everything set up auto pay, and the due date might be on a Saturday or Sunday, I might be delayed till Monday or Tuesday, I just wait till it clears my checking account. And then I enter it. I know I have enough money in my checking account at all times to cover anything that might clear my bank, plus some spending that I might do when I'm on the road. But to minimize the amount of entry I do, I set up a second checking account, which I only put in the amount of money that I need to use like cash. And then I use my debit card on that checking account to do my spending. So if I go to the grocery store, and I buy some snacks, or some some food to take with me, I use that other checking account. The only transaction I have to record in my main checking account is that once a week transfer, so that's one time and it's the same. So it's a recurring transaction that I click on, make sure the dates right, I click on and I'm done. So that takes out a lot of the entry that I don't have to do. I don't even get receipts for these things unless it's something related to work. They will be reimbursed for which I'm not using that checking account most of the time, but just in case or if it's a receipt you need for taxes, then you might want to keep the receipt. But once that gets down to three I tried to buy something that's cost more than what I got. It won't allow me to buy it. So it keeps you on your budget. Pretty simple. So it reduces the amount of transactions you got to enter, and it keeps you on your budget. So it's a win win situation. And that's the main reason why I'm using that. Tracking makes it easier for you to do a budget, which is your control center of your personal finances. I like to call it the control center, because I think it sounds better, that a lot of people cringe when you say you got to do a budget, they don't want to do it, for some reason, it's a block in their brain. So it's a control center of your personal finances. If you got your tracking done for the first month, if you're just getting started, and you got a new app, what I recommend is give the current month, whatever month you're in, whatever day of the month, he go back to the first of the month, and you enter your bank balance as of the first of the month, if you can figure out what that was. If there's any outstanding transactions that hasn't reduced the bank balance that was done the previous month, may be one or two items, put those in and use the actual date that you did it. And then enter everything that's happened in your checking account up to the current date. Once you got that done, you'll see how easy it is to use this app. Once you put in your mortgage payment, or your rent, and your electric bill and your gas bill and maybe your auto payment, and what are all your loans, those items that you pay every month, you can set up a read and current transaction. And they'll do it set on then this around the same date that you paid it the first time. So that makes life the second month, a little bit faster, a little bit easier. All your like your gasoline purchases, once you set up the place where you go most often, to get gas your grocery store, most people usually go to the same places on a regular basis based on where they live. Once you do it, the first time II II don't have to set up a recurring transaction that when you start typing it in or pop up, and then you just select it. And then the category of be selected for you. He just changed the date, make sure it's in the correct category, put in the dollar amount, and you're done. You hit enter, you're done, you go on to the next transaction, you do that for the first 30 days, the first month, once the first month is at the end, it could be at the end of the month, or maybe that first day of the next month. Now you can do a report by category. And you can see where you're spending your money. And why is that important? Because that's the exact same information you need for your control center. To set up your first budget, you got your beginning of your budget, you just print that out. And you have it may not when you set up your budget on a spreadsheet. And that's what I highly recommend. Set up a spreadsheet, use the same names of the categories that your your app you're using is doing. And you just gotta group it together by housing, transportation, food and clothing.

Unknown:

Debt, which would be all your

Charles McDonald:

credit card payments. And it's only your credit card payments, your personal loans, your payday loans, you because your auto loan goes in transportation, your home mortgage, and all your home mortgages go in your housing. And we're grouping things together like that. So housing would be all your mortgage payments, all your utilities, which I include internet because it's only Pacific to that location. You can't take it with you. I also include phone because I'm old school, and the phone used to be wired to the house and it was just be at the home. So my cell phone is under housing. Now we're on housing, which is then under Utilities. And once you get that done the first time every month, you just print a report and you enter some numbers. Now your budget we're going to talk about in the next episode, where we're focusing on the benefits of tracking and on tracking he can have subcategories say you have transportation. Then within transportation, you have auto, you might have two auto loans, and then you have gasoline Well, under gasoline, if you want to, you don't have to, you could split out the gas that you put in each individual automobile. So you could have yours and your wife, you could separate that out as a subcategory under fuel. But you'd have to set that up. And then when you make when they do the entry, you're going to have to know who did what. So it kind of makes it a little more confusing, but it can be done. Then you got a category for credit, or debt. That should be all your credit cards and all your personal loans, your student loans, things like that. Then after that, we I covered entertainment, savings, you need to have a category where you set and savings aside on a regular basis. And when we do a budget, we're going to talk more about how to determine how much you can save. On and on, on go. We go. But if you look at the detail of the categories, and you look at, say your transportation, you think well, maybe I'm spending too much there, you can actually look at how much the loans are, how much you're paying for gasoline, maybe that particular month, you had a repair, bought new tires for one of the car, which jumped up the numbers somewhat. So that's why you're thinking maybe I'm spending too much on transportation, that maybe there was a need, and it was a necessary need. I would set up on your savings. And now it could be one savings account, but have one category you call it emergency fund. And then savings. If you have if you're saving monies for goals, you can put all your different goals in there. But you're putting it all in one place,

Unknown:

you're just for your own purpose,

Charles McDonald:

break in and out. So you know, okay, my emergency fund is this, my goals

Unknown:

are this, etc. Now, I know that

Charles McDonald:

savings account where you keep your checking account, probably doesn't pay a high rate of interest. So once your emergency fund gets three, four or 5000 in there, look online, or call a high yield savings account, they're gonna pay a lot more interest as to paying somewhere around 2%. Now, which is way less than inflation, but it's way more than your local bank is paying you. Or if you can find a credit union or somewhere else that pay a higher rate for your savings, you got to make it easy, easy, you can transfer money into it fairly easy. And transfer money out of it very easy when you need to use it. So that's what I do. So I have a have a regular savings account on my local bank, the same bank, they have my checking, I have a high yield savings account that I can go online and the high yield savings account or January online banks. And they're connected with a real bank somewhere. But you can just go online login and you can transfer money in you can transfer money out within that bank, he could maybe get a money market account or a CD or something else, depending how much money you have, and what the interest rates are pay him to maximize the use of your money is what we're looking here. So now once we get all this done, we have the ability to create a budget, which is very important, and it's gonna be the next step, and the next episode in this series. I'll be back in one moment with my final thoughts. If you're interested, and learning more about a software that's online to can help you do your tracking your budget and keep track of all your debt. It's a one time fee that you pay. It's very expensive, but it works very good. I use it along with my other tracking software. If you're interested, send me an email at reduced debt increase well@gmail.com And I'd be more than happy to send you the information so you can review it and maybe think about making a investment for your personal finances. tracking your spending and your income is the lifeline of your personal finances. If you don't do it, then creating a budget is almost nearly empty. possible. So keep track of everything. And you'll be better off in the long run. The benefits are you knowing where your money is coming from you also knowing where your money is going, you can look at things that maybe you forgot that you signed up for subscriptions or whatever, that's getting paid every quarter, maybe once a year, and you can cancel them. So it's important to look back once you start doing it the past year, find out some things that you may have paid a yearly subscription on, because you probably forgot. Antivirus software is the one I think is the biggest killer on that, because maybe you had one computer, and you set up a annual subscription, and it deducted automatically from your checking account. And then maybe you bought a second computer, you can still use that same subscription, but maybe you bought a second one. So you got two subscriptions for the same thing, one on each computer, well, you can cancel one of those, and use the subscription on the two computers. But before you cancel one, make sure it allows you to do more than one computer. And it's transferable. That's probably the number one. And maybe you have a gym membership that you don't use anymore. Whatever the case may be, a need to cancel those items. So the benefit of looking back over time for the past year of things you spent your money on, and things that maybe you still are currently paying for that you forgot about, or no longer use or need, you can get rid of. And that's a big step and helping you reduce your debt. So my next episode, I'm going to talk about setting up a budget and getting started with that. So for now, your goal should be to start tracking your money, if you use and count about is a cheap and easy way to do it. $9.90 $5 a year I might be off on that. But somewhere around there, it's less than $10 a year I know that. And don't do the automatic download, and everything yourself. That way you're more aware of what's going on and your finances, tried to keep it simple. Use the categories that are in your app that you're that you've downloaded that you're using or you've signed up for online, and there's a tree trial. If you use it for more than a couple days and you enter a lot of information in there, you're probably gonna keep on using it. That's why they do the free trials to get you in. And then once you're in then you probably stay with the same one. But keep it simple. Keep it easy. Streamline your entry by having a second checking account where we every pay day you transfer a set amount of money for your spending, and then that'd be your small out of pocket type spending that you typically would have used TASH in the past for getting your debt under control is a series of steps that everybody must go through. But once you've completed it and do it on a regular basis, you'll be having great results and you'll be glad you did so