Keeping track of income and spending is the first step in keeping personal finance under control. The second step is having a budget of some type or a Control Center. These two steps are the key to financial success and reducing debt.
Article Links: https://www.thebalancemoney.com/how-to-track-your-expenses-2385695 by Miriam Caldwell
https://whybudgeting.com/personal-budget-categories/ by Hugo Guerreiro
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Hello, I'm your host, Mr. Chuck, I a 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. Tracking for a budget, keeping track of income and spending is the first step in keeping personal finances under control. The second step is having a budget of some type, or a control center, as I call it. These two steps are the key to financial success and reducing debt. Two articles in my show notes. The first one is the balance money.com, how to track your expenses. And the second one is why budgeting.com personal budget categories, I'm going to talk about what categories are in the second half of this podcast. So what is tracking? It's this the process of recording your income and your spending your expenses every day, as you do it, you can do it on a written piece of paper. Or you can get yourself an app, if you have a smartphone or a computer. I would say do it on a computer at home, whether you have a laptop or desktop doesn't matter. A lot of these apps, you just log into them online, you put in your information, and you don't even download the program onto your computer. And that's what I do a program called count about.com. It's $9.99 a year, I just paid for it. And I do not link any of my bank accounts directly to it. The purpose of tracking is so that you are aware of your spending. And if you automate it too much, you're not gonna be aware of your spending. That's my point. That way, you don't have to spend a lot of money for this particular app. Now there's many of them out there. If you just type in tracking personal finances or Google, you will have a hard time finding articles that talk about it. It's all advertising and or software programs that you can get either for your desktop, your laptop or your mobile smartphone, I have mine, I log in using my laptop. But I also have an app on my smartphone. So if I'm out and about I can go in and record. I gotta say I probably rarely do that. But I was doing it when I was a truck driver and I was home away from home for a week at a time I would do it do that. I find it's much easier just to keep the receipts, put them in your wallet or wherever. When you get home, put them on your desk and then enter them all at once on a daily basis. That way everything is up to date and you know how much money you would have in your checking account or what ever account you're spending money. You use them whether it's a credit card, you can know how close to your limit you're getting things like that. So it's important to do. And this article is how to track your expenses and stick to a budget. And what they're talking about here is creating a ledger and and doing it manually. Tracking expenses is one of the key factors in making the budget work for you. If you don't do not know how much you have spent each month. You cannot tell when you have overspent. Even a small expenses can cause you to blow your budget. There are several options available to track your expenses. One is the simplest is a written ledger or tracking system. It may be even easier to choose budgeting software that works with an app to track expenses on your phone. It will allow you to keep up on well on the go. And it's important to know how to track your expenses and a notebook. It can also help you become more aware of what you are spending and where you are spending so they can help you identify the areas where you need to make changes. So not saying anything in there about linking it to your bank account. They say create a ledger. First you need to have the your budget with you. You should also have a notebook available to you. You can divide your paper into three columns of piece you will need to write down each budget category at the top of the column, and we're going to talk about categories later, then you need to record the Assign amount next to it there. So there are already have already created a budget. And they already know the amount of monies, they want to try to keep under or within a limit. Well, if you're just getting started, you have no clue what those dollar amounts are. So what you should be done, if you're gonna do it on a piece of paper, is, what do you normally spend money on, when you're not at home. And these are items that are not fixed expenses, meaning they are different every time you do on gasoline, groceries, dining out whether it's fast food or whatever, that's all the three I can think of, that's the three major ones. And there may be others may be shopping, would be one life, he goes shopping for clothes, stuff like that, other than groceries. So those like four categories, he just do a piece of paper. And then you can write down, you know, the store the date, what you got, and the dollar amount. So you have a general idea of what you spent your money on, that's doing it on a piece of paper, the rest of your budget would be if you're doing it on paper, or ledger would be things that you pay monthly that are fixed. And you generally do it at home, such as your rent your utilities, your car payments, your mortgage payments, you know, their same month in and month out, you generally do it through your bank, you may have your bank up to automatically Pam. So then you just need to get those amounts and write down on a piece of paper because they shouldn't be the same month in the month out. Now your utilities gonna change your natural gas, your electric, your water, and sewer and your should be close, but they're going to be different every month, your trash may be the same every quarter, or how ever how often you ever pay it. So they're saying you do this, and you record your expenses throughout the day as you go. I say most people are not gonna do that. So just keep your receipts and do it at home. And that's much faster, if you want to put a note on the receipt for the category or the expense, you can do that. Stick it in your wallet, put it somewhere, you're not going to lose it, and you enter it at home, or you write it down when you get home. And then you need to stick to your spending limits, you supposed to keep a running total of them for a balance total. So if your budget is $500 for groceries a month, every time you buy groceries, you put in the dollar amount that you spent, and then you subtract it from the 500. And you keep a running bounce. That's a bit much choose what to do with the money didn't use now at the end of the month, if you didn't use all your budget, what are you going to do with that money? Well, the first few months, you're probably may not have a very good idea of what you need to spend and might you may be way over away under. So you need to allocate the money around until you get comfortable. And then once you get comfortable that you have the pretty close to what you actually spend on a month to month basis, then maybe you can consider do your roll over and add it to the next month's budget? Or do you transfer it into savings and start building up your emergency fund or savings for other goals. And at the end of the article, they're talking about using a budget software, I'd say don't worry about the budget software, you need to find yourself a software where you can track your spending and your income that you can put in your all your bank accounts, you can put in all your credit cards, and you know how much you owe, you can look at a glance what your balances are, you can update it easily. It's got categories already set up and not categories, but it's got a list of expenses that are pretty much already set up. And we're gonna start talking about categories. Because when you do an app, it's got a list of expenses generally in alphabetical order, auto transportation, a housing ah, utilities, which is by itself, and it's just basically a list of the most common expenses people have. But you need to do when you create your budget when you're setting up a budget is the Do it by category, income as a category. Then under income, you'd have your payroll, your spouse's payroll, and maybe rental income, whatever your incomes are in line by line, so you can see where your money is coming from, then when it totals, it's all under income. Same thing with expenses. We need to group our expenses by needs first, and needs our housing, transportation, food. I used to say food and clothing, bliss, call it food, which is groceries and dining out, and maybe savings and debt payments, and insurance. That's not in any of the other categories. I always say to everybody who wants to have control over their finances, having a budget in place is like holding a larger map of their finances where you know exactly where your money goes. See what our personal budget categories. And then the middle they have a list of expenses. This is that why budgeting.com Personal Budget dad's categories, you know, they got grooming rent car, they just got to listen expenses in no particular order, then the category they had would be housing, transportation, personal care, they call it essential bills, which is basically utilities. What I have is for categories is housing, transportation, and food and dining. Under those under housing, you'd have your mortgage payment, or your rent payment, all your utilities, all your subscriptions for your cable TV or your streaming services, your telephone if you have a home phone, and I put cell phones in there, because the home is a type of utility. So I include it under housing, if you want to put it someplace different you can. But that's what I do. Real estate taxes and insurance if you're buying your home or own your home, transportation, as your car payments, your gasoline repairs, oil changes, and do it by automobile. food and groceries or gross food would be groceries and dining out, I would categorize groceries where every time you go to a grocery store and you buy food, that's where it goes. And then dining out. And if you want to break dining out and fast food or sit down restaurant that's up to you. But dining out dining out what no matter what it is fast food or whatever your savings and credit cards would be the amount of money that you're putting in your savings account every month or want to put in and all the minimum payments on your credit cards. Now insurance goes to where the category where it belongs and your payments, your sum your loan payments, go to the categories they belong. But if you have a personal loan that you use to buy something that's not in those categories, you want to put that under savings and credit cards. And that would be a category by itself. And then after that we have our once entertainment, whatever you do for entertainment, may be hobbies may be children care, of course that could go under needs pet care, depending on your situation, you make two categories that are related to you. You can do them any way you want. As long as it makes sense to you. So if it makes sense to you then do it that way if it don't make sense to you don't do it that way is pretty simple. So they have income like transportation, personal development, medical health care rack could be a category your doctor bills, your subscription, your dentists, stuff like that. And you can also put in your health insurance if you're paying it for out of your own pocket. If it's not a deduction from your payroll, entertainment housing, food children Insurance insurance category would be like life insurance, disability insurance surance that's not anywhere else. Your health insurance and stuff like that. Business gifts essential bills. Well I'm putting that under Utilities which goes under housing, personal care pads, financial goals and debt savings and debt should go together as one category and I go down through this article, they have a munch examples food is one of the personal budget where people spend most of their money and not even realizing you pay three bucks here and $5 and next thing, next thing you know you spend$200 More than you really want. Examples are food groceries, eating out takeaway snacks. Personal Care is personal allowance, beauty products, personal hygiene, grooming, haircuts, massages, perfumes, clothing, shoes, accessories. And they have personal development, which is education related stuff. They have children, good kids allowance they care, babysitters, summer camps were fee whatever pet same thing food veterinarian Bill medication, toys, grooming pet supplies, training, medical health care doctor hospital dentists have like at that is grouping your expenses by category. And why you want to do that you want to do it so that when you look at your budget, you know, at a glance, you're spending this much on housing this much on transportation, this much on food and dining, this much on entertainment, and you can look at it and then you can decide down the road. If you're struggling paycheck to paycheck, struggling to pay your bills, he can look at work and I cut back. Well, my needs, I can't really cut back too much I can reduce my thermostat to reduce my utilities, but I really can't cut back much gasoline, well, the only way you control gasoline is putting a little bit less in your car, every time you fill up, don't fill up, put in $20, once a week, save, you can make it and feed can't quite make it on 20 Put in 30 Instead of filling up every week, because if you keep it under control, and you know you only have a limited amount of gas, you'll cut down his running around randomly. So that's the main thing about tracking. And setting up a budget that once you decide on the tracking software you're gonna use is gonna be set up mostly by expenses is not gonna have them grouped together by categories. So what I did is I went into my list, and I didn't add it, I want down the housing because that's a need. And that's my number one need. So I want in the housing and I want over. And in front of housing, I just put a one, everything related to housing, every grouping, every expense related to housing, I put in the front of the name a one. So for the mortgage payment insurance, and all my utilities, I put in a one. So now when I look at my category list, I have housing a one, it's right under income, because I start out with an income than a one. Because that's you know, the highest up in the alphabet because they're in alphabetical order says housing under housing, housing is a parent account. And you don't ever post anything into a parent account. And under the housing, you have home improvements, that's a sub accounts with the parent being housing so it gets grouped under housing, and then maybe real estate taxes. Same thing, utilities is a subcategory of housing and then each individual utility company they have listed is the utilities is the parent for them. So the utility line I don't post anything to post directly to the utility names company they have listed out separately and and then and it all totals up into one number. So my utilities totaled up in one number and I know total utilities and then I know the total where if I have subcategories in the other areas, they totaled together and then all those total in the housing. So I have one big number for everything. But then I can look at the subcategories and get one number for each individual subcategory. I hope that makes sense. Then I go to transportation I ate to that I want to all the food line groceries dining in fast food whatever the name was, I put a three then I'd savings or all the credit cards, payments, I put a four and for my savings I put that under a four. Now I have my needs covered now I did once once I categories as b, b one b two B three. And I didn't put in any particular order, but I pretty much everything else that was remaining I put under B, A, B, number B, one, b two, B three. So it's not really a need, but it's more a once. I hope that makes sense to you, because I did that on purpose. So when I create a report by transaction, I grouped it together by category. So I do report by category, it gives me the totals. And I can do it within a date range. And I use those numbers to put in my budget spreadsheet. And I put my budget spreadsheet in the same order as that report. So when I want to do my budget, I just print out that report and then I look right down the line, I just put it in the exact same order. So every time I print that report out, it's going to be close. Now it's gonna vary from time to time, if a new category shows up, that wasn't there before, but it's going to be close. So it makes updating your budget spreadsheet really easy. And you get some good numbers. Now, when you create the budget, he do it on a spreadsheet, he just manually do it, you got to be able to put in the formulas to do the math for you. It's not that difficult. You have description on column A, you have column B, your budgeted dollar amount, which basically is the previous 30 days amount start, then you have your actual budget, which is current month, from the beginning of the month that a particular date you're working on, then you have the next column, D I believe is the difference. And then column E, you can have percent percent of income. In order to get an idea by looking at percentages. How much of your income are you using to make your mortgage payment, how much of your income are you using to make your car payment. And that really gives you a good, clear picture. I'll be back here I have one more topic to talk about the spreadsheet I've found. And I got a link to it in my show notes. For those of you interested I'm going to talk about that. Hear coming up. I'll be back in one moment with my final thoughts. If you're interested in learning about an online software that helped myself get out of debt, it does tracking, budgeting, and keeps track of all your assets and all your debt. And he even tells you how much and when to transfer money into your savings account, and how much and when to transfer money to your debt and which debts to pay off in order. First. It's not cheap. It's a one time payment. But it will definitely be an investment, something and yourself and an investment in your personal financial life. If you're interested, send me an email at reduce debt increase email@example.com. And I'll send you the information about this online software that works great for me. Now, once you've done your tracking for 30 days, or if you're just getting started, and you got a new app that you want to use, you can go back 30 days in your checking account online, put in your opening bank balance, and then enter all the transactions that happened in the last 30 days. Now you have some information in there, you can do yourself a report and get some good information at least what happened in the last 30 days. I think a lot of people have gotten away from tracking their spending and their income. Because they can just go online look in their bank and see what their balance is and then say, Oh, I have $500 I can still spend money. So they pay some bills and they go on they start spending money. Next thing I know they're overdrawn on their checking account because they forgot about the balance. They didn't keep a running balance in her head. It's hard to do. So that's the important part. You don't want to go overdrawn. You want to pay your bills on time. Can you want to know when your bills are gonna come due and look forward. So you have a general idea of how much money you need in your checking account so you don't overspend. I found an app that had an app. I found a spreadsheet when I was looking for like templates for budgeting. One day, I came across a spreadsheet and You can find that link in my show notes, happy Gore giraffe.org. Forward slash donate. Now, you gotta go on that donation page, because that's where the spreadsheet link is where you can download the spreadsheet. So if you already have a spreadsheet program, I use Excel. So I don't they, I downloaded it, and I loaded it up in Excel. And then I saved it to a different page, place other than download directory. And it's a really handy spreadsheet. It's an alleged, you know, how much money you have to spend on a weekly basis. In the spreadsheet, you use start out by putting in, you know, how long they recommend doing it for a year, and going to your Ford, and you got to determine a start date. So I was doing this in late January, so I use February 1, because February is the first month, or I have no income from working, completely retired. So all my income is from my pension and also security. So that's why I pick February 1, which happens to be a Wednesday, because this goes week by week. So it's gonna go from Wednesday, the Wednesday, Wednesday to Wednesday. So then that the income side of it and wants to know your bank balance as of your start date. So I put that in there, then income sources so you put in the name, I put in Social Security, to type its monthly, how much I'm going to get a month and the date, I'm going to receive it and then I put in my pension monthly, the amount, the date, I'm going to receive it to items. That's all I had to do, I'm done. Then you go to it's called fixed expenses. They have weekly, monthly yearly and one time weekly unless you have daycare that you pay weekly or pet care of some type that you pay weekly, I don't have that so that's zero there's nothing in there monthly is all my monthly expenses that I'm gonna do, which includes transferring money to my savings. My Medicare payment, How much is going to come out my check for Medicare which is should be zero because it's a net amount because the amount I put in my as my income is net of the Medicare so that should be zero. No big deal. My I put in my credit card payment I have one credit card I use. I know the average amount I pay every month so I put that number in there. I list all my individual utilities they pay down their individually, how much it is you put in the name, the amount in the day of the month they it's paid. So for my my utilities, I just looked I did a report. I looked up how much am I paying and What date is it normally come on my checking account. So my electric bill was $92 and it comes out on the fifth. I have a phone bill $10 comes out on the 28th I have my internet $55 comes out on the ninth I have my cell phone $80 comes out on the 28th my gas bill natural gas 122 comes out on November 6, and my streaming TV $17 comes out around the 28 I got that in there. Now the big one here is nearly everything that you pay either one time a year, or twice a year. Quarterly. You put on the yearly so I have car insurance I pay semiannual. So I just car insurance I put the amount and the date it was going to do now these are all dates from your start date on forward. So I put the car insurance in twice because it's semi annual and I put the dates in their home insurance is an annual once a year. I put the total amount in and I put the date in there real estate taxes twice a year and I did the same thing. Now it's from February 4. So our paid real estate taxes in January. So I put what and when I pay to kind of be due in June and then January of next year. And I have an umbrella insurance that it's an additional coverage over my home and auto Am I have nearly motorcycle insurance. And then my trash service is quarterly so I put that in there four times and my water and sewers quarterly so I put that in there four times. Now here's the best part. They have down the one they got these eat One of the neurons sheet or page is called Happy money. And once you get all your expenses in there, you go to happy money, it takes your total income minus your fixed expenses, comes up with in this spendable amount of money, and then divides that by the number of weeks. So I got it for years. So it's divided by 52 weeks, and it says my maximum allowance is about $212, then you go down, it says actual weekly allowance, I set it for$175. My days, my account will go negative is zero, my lowest bank balance is $400. And underspending by $19 per week, if I only spend that weekly allowance month, then they have. So it tells you, once you put your fixed expenses in there, it tells you how much money you have weekly to buy things as gasoline, groceries, you know things when you're out and about your non fixed expense, things that are different, every time you buy them. At is a nice number to have. So now I know I can spend $175 A week times for the over $600 a month. And that's including after I've put money into my savings account. So that's not too bad. Then you have an adjustment, cash flow, and it's the numbers. There's another spreadsheet starting with your start date going forward. And it gives you your bank balance running as all these different events are being paid. That's why it's important to put in the exact day or as close to the day that your expenses are paid. Because now you can come here and look and see, does that match my bank balance? My gosh, it does, I can't pull with you. But because I had to make an adjustment, because I got a paycheck on the third of February that I shouldn't have gotten in January. So I made a positive adjustment for that. A my credit card payment was more than what my budgeted amount was. So I made the adjustment for that, my golly, my checking account matches to the pen. And it's got the $175 weekly allowance deducted out of. So if I don't spend $175, they only spend 100, I can make an adjustment at the end of the week. Plus 75. And now my bank balance should match this spreadsheet. I like it, it tells you how much money and if you don't want to go and put in all that detail. You can just put utilities. And if you have a good close number, t know what your monthly utility bills are all together. And again, just put in one number and say you paid on 15. You can do that with all your expenses to use, group them together and plug in number. The idea because that's what I did the first time, and I came up with about the same amount. I mean, that is close. And it's only off maybe 10 or $20. So it works really good. It gives you good information. But you cannot do this until you know some numbers and you need to be tracking your spending. In order to know those numbers. Good luck, if you're interested and that is happy giraffe.org. And if you'd like to make a donation if you use it. After a while in, you find it helpful. You can make a donation to them. You can find a link in my show notes. The Happy draft spreadsheet could be used as your budget and gives you an idea of where the money is going. When it's gonna be paid out your checking account you can look forward gives you good information. So you could use it instead of a budget and tells you how much money you have available to spend every week. You can control your spending by keeping it under that to happy giraffe.org has three videos that explains how how to use it and what to do and how to do some tracking. And they have us another program they use for tracking I would say keep on using the same tracking program. So let's say that your budget your weekly li Once is $300. And if you spend$225, one week, you transfer the$75 remaining into a savings account, and your checking account is never going to go negative, it's going to tell you, as long as you stay on your spending, you're gonna be good. If you go over the amount, you can make it up the previous and the next week by spending a little bit less, maybe there's a timing issue there. At the worst case scenario, you can look on the spreadsheet, it will tell you if your checking account is going to go negative. Now if you go over, you make an adjustment, and you subtract the excess, anyone over the $300, say you spent $330. So at the end of the week, you put a minus $30 to adjust your bank balance down and see how that affects you going forward. If you can make that up, it shouldn't affect you. Maybe you can make it up to $15 over the next two weeks, or $30 the next week, it is a handy spreadsheet to use and to understand and get to know that somebody's done all the work for you. He just got to put in some numbers. Fine tune it with the dates when you pay things that pay dates when your income comes in. Maybe your payroll is not the same, that's gonna make a little more difficult. If you get paid every week, at the same amount. It's gonna be simple. But if you if your pay is different from week to week, figuring out an average pay that you make over the last month or two months and figure out your average and use that instead and get you close. Now your bank balance is not going to match but you get an idea of what your weekly allowance. You can make adjustments when your pay goes up or down to keep your bank balance match and what it actually is. I think you'd be happy if you use it and you'll be glad you did. So