Reduce Debt Increase Wealth

Tracking Expenses

January 16, 2022 MIsterchuck Season 2 Episode 96
Reduce Debt Increase Wealth
Tracking Expenses
Show Notes Transcript

What is tracking and how does this work with a budget. First a budget only shows what you should be spending. Without tracking how would a person know if on track or spending too much. The most important part of your personal financial life should be tracking.

 Article Links: By Miriam Caldwell

 Small Expenses That Can Add up to Overspending Issues ( By Miriam Caldwell

Wanting Budget Spreadsheet Place Spreadsheet as Subject
All other inquires place topic into Subject.

Charles McDonald:

Hello, I'm your host, Mr. Chuck, a retired accountant turn truck driver, I reduce my debt in a relatively short period of time, debt reduction to achieve financial freedom takes commitment, confidence, determination, tracking expenses, what is tracking? And how does it work with a budget. First, a budget only shows what you should be spending, or it's a guideline on your spending. Without tracking, how would a person know, if you're on track, or you're spending too much the most important part of your personal financial life should be tracking. I have two articles in my show notes to express this from the how to track your expenses. And the other one is, small expenses can cause you to blow your budget. Both of them are fairly true statements. So what is tracking? On this kind of give a little bit of a history, this is the best way I know how to present this. Back in the olden days, the 1980s, or an ATM before, before there was such a thing as online banking. He kept a check arrestor, which was your running balance. And then every time you wrote a check, you was subtracted from your balance. So you had a fairly good idea how much money you had in your checking account. Even back then, in the 80s, people never could took track of anything. And they never record the checks, they wrote, they go to the grocery store and spend a bunch of money, they never recorded it in their check register. And so I know how much money I got in my checking account. Well, that might be true, but you sometimes you forget, and then you're going to overspend. And once you spend more money than what you have, what happens, the bank's gonna charge you an overdraft fee, their balance fee, all kinds of fees, whatever fees, they can charge you. So you're just wasting your money. Then along came online banking, and then everybody got away from keeping their check register, because you could just go online and look at your balance, he could look to see which checks are cleared. And you could keep track of in your head, because you only had maybe three or four checks outstanding. And you had a fairly good idea of how much money he may have in your checking account. And people got lazier and lazier. And that's when the problems started. As far as I know, there is no bank out there maybe one or two, but none that I know about where you can categorize the expenses? In other words, can you go in to your online bank account? And say you wrote a check from rent? Can you put a category on that for rent, and then we'll give you a report to show you the dates. And the amounts that you pay? will generate a report for you say a landlord comes and says, Why you in the last three months, you were three days late on my rent. And you're thinking, Well, no, I paid that on time. You can least go to your online checking account and see when it cleared. But that doesn't tell you when you wrote the check. That doesn't tell you when you hand it over to the landlord. Maybe you handed it over to him on the due date. Maybe they waited a couple days say the due date was a Saturday, and maybe they didn't deposit it until Tuesday. And then they're looking at their deposit and say Uh huh, oh, that guy paid me late. So now what are you gonna do? You have no proof. That's why I always do electronic transfer, go into your online checking account and you set it up to pay it on the due date. And the bank will pay it on that exact day and everything is always on time and automate as many of your expenses that you can. And I like automated through my bank, or I set up automatic payments for my utilities for my mortgage for any loans I may have. I set it up as automatic payments through the bank. Why? Because it's easier to go to one place to automate your payments and then going to five different places to do the same thing. So So why go to your electric company to set up an automatic payment and then go to the gas natural gas company to set up an automatic payment, and then go to your mortgage rates and set up automatic payment, maybe they don't let you do it. But you can do that all through your online checking account. So you're thinking, well, that's keeping track of it. But that's not good enough. For those of you who struggled with budgeting, maybe you went through and you set up a budget, and you came up with dollar amounts. And then you went through every month at the end of the month, and you try to add up everything that you spent for that category. So you could put it on the piece of paper in a spreadsheet. And he thought that was way too much work, it wasn't worth it. And you basically gave up because he was always going over your budget, or he had one category that was way that you never spent even close to all the money. And then you had categories where you always went way over. And it was just a hassle. I don't blame him. Because it is. But there's easier ways to do things. In the article, how to track your expenses from the They're saying that you should create a ledger. First you need to have your budget with you. He should also have another notebook available to you, you can divide your paper into three columns apiece, you will then be able to write down each budget category at the top of the column, then when you need to record the Assign amount next to it. If you do not create if you have not created a budget and are tracking your expenses so that you can create one, then you should decide on the basic spending category such as utilities, food, rent, eating out fun, money, and insurance, record each of these at the top of the paper. So what they're saying is you're going to carry a notebook with you. And the beginning of the month, you're gonna take a piece of paper and you're going to divide it in three or four Hemery columns you get I'd put it landscape, it give more columns in there, then you're going to put a category in each one of those columns. And then you're going to put the amount that you budget it for that column. And then as you go through the month, you're gonna subtract from it, you're going to record, every time you make a purchase, say it's groceries, every time you go to grocery store, you can say to date, say that 10 Kroger, the dollar amount and subtracted from your budget amount. Every month, every time you do that, you're going to do that on this piece of paper. Another way to do it would be to create a spreadsheet, basically, that looks the same. And then when you get home, keep your receipts and then enter all the receipts into this ledger and keep a running balance of what how much you've spent for your budget. And when your budget is going over then either one or two things Either you did not budget enough money for that category, and you're actually spending more or you're just playing overspending. So if it's close to the end of the month, and you go over by a couple of bucks, you doing good. If it's the beginning of the month, the first third of the month and you're over by a few $100? Well, I would guess either something came up and you had a bigger expense in that category than what you planned on. Or you just didn't plan on a big enough dollar amount for that particular category. So then you need to adjust your budgeting for that category. And maybe if you got to make up some money, take it out another category. So that's why you need to track your expenses. You need to know where you're spending your money and when you're spending your money. So that you can adjust for that. So you know when these expenses are gonna come up. So you have the money to timely make the payments. So you go and record all your expenses back to the article, stick to your spending limit limits and then choose what to do is the money you did not use. This is important at the end of the month, you have the option of rolling the money over into the next month's category or transferring it to a savings account, I would say transfer it to a savings account. For bills that vary like your power bill, you may want to roll the bounce forward to help even out the cost of the utilities each month. For things like groceries you may want to transfer it to savings so you can build up your emergency fund or work towards other goals. The idea of having a budget the idea of keeping track of your spending and this goes for income also so that you know, if your budget is close to start with, and two, that allow you to determine how much money you can transfer to savings account well without having to worry about your checking account being overdrawn, Corson. And there's tips there saying budgeting software's or budgeting system. That's one way to do it, I would recommend using your own check register, like the olden days, but now it's automated. The one that I use, and then I get reports off of that's important is count about, it's an online, you don't download anything into your computer. You just go online, put in your password, and your information is there. Once you build up a first month or so, then you can start getting reports and see how you're doing. Count inbound is only $9.95 a year. That's not a month, that's a year. So for $10 a year, you have a pretty good system, a check register, he can put in your checking, multiple checkings, he could put in savings, multiple savings, he can put in your credit cards, multiple credit cards, and you get the same thing for all that. So if you have a checking account, maybe one savings account and five credit cards, you can put on all credit cards, not the homepage, you can see the balance of everything on the glass. And once you put in 30 days or so worth of information, you can get reports and what I like to use is the monthly comparison report as it's gonna compare the previous month, I always do the previous month and then it's comparing it to the previous year. So until you've been using this for over a year, you're not going to have a comparison to the previous year. But what's the importance? Why do I look at the previous month? Because what this report does, it gives me my income and my expenses by category I can use the totals to help adjust my budget. So I'm looking at a monthly comparison for October 2021 It's got my income in there okay, well then we know that one's monthly it's always the same and my paycheck we know that's okay. And I can look at that and say well how close was that to what I projected if it well it's gonna be close because I've been doing this for a few years. Then it has auto and transport it breaks down the categories got the total $157 And then it's got gas and fuel 135 And then it's got service and parts 22 I bought some light bulbs for the car. I know about $160 is a good amount of budget for my gas and it's going to be pretty much close it's going to be a little over because I don't buy light bulbs for the car every year then got bills and utilities $574 Oh she's that's way up. Well it's up because an October I paid my water and sewer which was $285 the rest of everything else stays pretty much the same. So every quarter I got to remember to increase my budget for my water and sewer so I don't forget about so it gives me that then I got entertainment that which is subscriptions for TV. Thank fees which it's rare ever pay a bank fee is $1 dollar six cents and food and dining I got and it breaks down the coffee shops and restaurants that's mostly went on the road. I'm a truck driver, and health and fitness as my doctor my copay home insurance came up. Investments money I transferred to investment account personal care as my hair got a haircut and shopping, which is I spend money on my hobbies, which I'm calling hobbies. But sometimes it's electronics and software and his hobbies and general merchandise or those types of things. So this gives me an ID I can look here and then look up my budget and see how close I am. Well I'm right on the money because I've been doing it for a few years. But it's easy. The only thing I have to do is create a report. Now online thing I'm gonna warn you about Um, count about when you go to do a report, it's got, you know, you got to put in a title, I never save it year to date is the default, you can change that to last month last quarter or last year doesn't really matter. I've only been using it since December of 2020. So not quite a year yet. Well, by the time this comes out, it'll be a year. When you click on checking account, only now I only want to look at one account at a time. So I wanted to see what my checking account because I my budget for my my budget is based on pretty much my checking account. If you're paying your monthly expenses through a credit card, then maybe you need to add your checking account and whatever credit card you use isn't together, which you can select either or, or both, or all. I like to look at one account at a time. But when you do that, it says personal checking as my account. And then when you hit enter, the cursor is still in that box, you got to make sure that cursor is outside that box. Same thing for categories, I select all categories. And then they have a thing called tags, you can tag things to keep track of certain expense, hit run. If it doesn't run, it comes up blank, that means that cursor was inside the box, you got to get it out in the box before you hit Run. That pops up. And there it is. And it comes up the same at the bottom is pretty neat because it's got money, the net amount, it has all these categories, and then it's got my credit card shows how much I paid the credit card. And then how much do I put into savings for the net transfer or the net amount of money that came out of my account. So I $4,700 came out and roughly 6001. So I'm leaving money in the checking account to make sure I don't bounce checks. And part of your budget should be that you should build up your checking account. So you have a minimum of 300 or $500 in air, so that you have a leeway, you don't want to put all your money in your savings account then have to transfer back to your checking account. Because you only allowed six transfers out of the savings account in any one month. So you don't want to be flipping back and forth. If you do more than six transfers out of a savings account, in the same month, the banks gonna charge you a fee, and they love doing that. So that's what I do. And that's what I recommend, do get yourself some type of software, you can then download it on your computer. In this case for count about the software that I'm using, I just log into the internet, I put in my information and it's fairly easy to use. You can set up reoccurring transactions also. So let's say the first month you set up your rent, your utilities, your all your payments for the minimum payment on your all your credit cards are your loan payments. Once you guys set it up for the proper due date, when it's due and everything, you can then turn that into a reoccurring transaction. And the program will then you can set when you set it up, you set it up every monthly. So every month at that date, they'll pop up on your screen. So remind you that that's something that has to be paid. If you have it sign up for your automatic payments through your online bank account. Then only thing you need to do is look up the online account has a cleared yes. It say here Yes, and you hit the check mark and post it and subtracts it from your check register. And you're all done. And you do that click click click click and then you look at your check register and you're pretty much all done. So it's fairly easy to use. And it definitely makes it easier especially when you start to get those reports and you can get a report based on your budget. It's got all these budget categories in there. You select the ones that you're using for your budgeting purposes so they everything lines up. He have a category that's the parent category you don't post to the parent category and but you want to post to the like food and entertainment they'll have restaurants coffee shops, groceries, you know all the subcategories. You post the dogs amount to the subcategories, and then it told totals that up to that category for you, and gives you a nice report. Now small expenses can add up to over spending issues. No, don't not overlook small amounts, it's important. So when you get your budget set up and you find tuned in, you know that everything that's coming out your budget is what happening every every month, every quarter, every six months, whatever the time period is. And if there's anything in there that you no longer use, are no longer need or Reman forgot your pan, you need to cancel it out of it, if you can't cancel it. And that will free up some more money for you. You're looking for money that you're wasting, and you can trim that off, and will definitely help you if you're struggling to get rid of those credit card payments. So we're going to talk about small expenses. Whether you're looking for ways to save on your monthly spending, or are you keep blowing your budget each month, perhaps you need to investigate where you're overspending. It is important to become more aware of your small expenses, and how you may be spending more money then you realize the small purchases can add up quickly. So let's say that every day you go on a break in the afternoon, you buy a candy bar for $1.25. Well, dollar 25 times five is $5 $6.25. If you're struggling to make payments on things 625 times four, I'll let you do the math because I kind of do real quick. I don't want to say it because I could get it wrong. adds up 12 $24 plus 24 $25 a month, which could be the difference of making a payment on time or being overdrawn on your checking account. Small expenses in your budget can be different things every day. Perhaps you love that steaming cup of coffee, or pastry on the way to work. Maybe a couple of dollars each day to rent a DVD from Redbox or other such location this an old art, it could be afternoon, pick me up sodas, or a new book every few days for your e reader. Some people make make several in app purchases for a game for themselves or for a child and others feel they must eat lunch out each day. Little purchases really cost and they gave us an example. It's important to find out how much you're really spending on these specific small categories. It can be done in a few ways. One is to write down all your spending based on specific category for entire week or month. I do it by the week. physically writing it down and recording in your on your phone will make you more aware that you are spending and why. Another way to money self is a budgeting app and there promote naps. If you're using cash, you can record it manually or keep the receipts to look over then in the week. Keep the receipts go home and enter it in your spreadsheet or write it on your ledger. Every day. Don't do it once a week because you're getting out of control. The idea of this is to make you aware of where you're spending your money. If you do it once a week, it's too late. If you do it, maybe by Wednesday, you'll say I'm spending way too much money, I gotta quit doing it. You know, maybe it's gonna be as early as Tuesday. So how much is too much to spend on Pacific as to each individual. Once you realize you're spending around $70 a month on coffee, about the cost of one cup a day that adds up to $140 a year, you can determine that That sounds reasonable for you to spend on coffee each year. However, if you're barely getting by that $70 A month can make a huge difference. And reaching goals or paying bills. Everything counts. So if you do the if you get the coffee in the morning, that's five bucks to get to Sodor an afternoon that's a buck and a quarter, or six and a quarter now a day. Six times five is $30.30 times four is 120 $120 a month. You could say just doing away with two things and save time. I'm not going to get that coffee, do the coffee at home. Get in a coffee club at work whenever it is. There's a cheaper way to do it everything. So this is what you have to do if you're determined to get out of If you want to maximize your savings, minimize your spending. And I'm not say minimize your spending to a point where you're not doing things, I'm saying just keep track of it. Keep track of, maybe you go out every Friday and spend $100 at the local bar or at a restaurant, maybe you go out on a date three times a week, but you need maybe you should cut back, if you're hurting. If you have that many credit cards was that much debt, and you keep putting these expenses on a credit card. One you're not doing number one crit, creating new debt is the number one thing you should be doing. And how you do that. By keeping a track of what you're doing, the more you keep track of what you're doing. the better off you're gonna be, the more accurate that you're tracking on your expenses, the closer to your budget will be. And then that will give you a better insight of how much money it go over to the savings. And how much money and how soon you can be out of debt is not difficult. You just got to do it. I'll be back in one moment with my final thoughts. If you listen to this podcast, reduce that increase well, on an Apple device, scroll through all the episodes towards the bottom. And you can select write a review, and leave your comments. And you can rate this podcast, I appreciate all feedback. And I thank you for your time and doing so. Tracking your expenses is important. Whether you've already set up a budget, or going to set up a budget if you track your expenses. And if you track your expenses in a application that will give you reports that you can categorize everything that you enter in there. Whether it's rent, mortgage payment, credit card payments, utilities, groceries, gasoline, auto repairs, entertainment, subscriptions for TV, which could be that or it could also go under Utilities. Whatever you do, categorize and then be consistently do the same thing. So if you've never set up a budget before, if you hadn't kept track of a check register, then the number one thing you need to do for is to get yourself an app or do it on paper that an app is a whole lot easier. town about this, the program I use is an online program, you can log into it, no matter where computer you're on doesn't really matter. And he does all those things, and use it for a month. Or if you're really in a hurry. I don't know why. Go back and enter all the items and your checking account for the previous month. So look at the first of the month, and put in all the items that you entered for the previous month, and then do it for the current. And now it gives me two months worth of data. And then you can create reports and see what categories and how much money you're spending by category. And then you can set up a budget and this is a matter of getting report from your application. And printing it out or showing it on the screen and then going into a budget, whether it's a spreadsheet or whatever, and entering the numbers by category, and then you have your budgeted set up. Remember, I don't tell you to sacrifice when setting up a budget. Your budget should be set up with the actual amounts that you are currently spending. And that's how you get started. Then once you have everything identify, and that dollar amounts identify, then what you do is look at your budget and what items you no longer use. There's no items you no longer need. And you go in and cancel before the next payment is due. And once you get that done, then the next step would be to look at where you're spending your money, and can you get it reduced somehow. Utilities, you would set your thermostat back. If you don't have a programmable thermostat, if you have your own home. More, you can program it to lower the temperature. When you're gone, increase the temperature when you're home, and lower the temperature when you're asleep, and then increase it before you get up. That's what I do. And you'll save some money on utilities. Also, your cell phone, your internet service, your cable service TV, he shouldn't be having cable TV, he should be streaming. If you're paying for an internet service, you should maximize that to the fullest. And you can do that by streaming your TV and streaming your TV. It's a whole lot cheaper than paying for cable. You might even be paying for the internet, on the cable come through the cable comm I have a cable company that doesn't even offer cable TV anymore, it says basically internet service. I think some of you may know what that would be, I'm not gonna mention their name. And then keep it under control. Don't get 10 different streaming services, because then you can spend a lot of money, get one or two, pick out the ones that have the channels that you watch the most. And then only subscribe to that one or two. And you'll say at least $100 A month or somewhere close to by doing same way with yourself. Call him up if Ben had the same plan for a couple years, call him up. I now what plans are offering what he can get maybe unlimited voice and text unlimited data might even cost you less than what your current plan what you're paying. So if you can get more service for less money, you need to do that, you should be doing this every couple years or every year, you should always be looking for ways to save money to reduce your spending no matter what it is. And no small items do add up. So if you stop somewhere and you buy a coffee twice a day, because you just feel like drinking a cup of coffee because you like it, quit doing it do it once a day, don't do it at all. Because that $5 Here $5 there, over time is gonna add up. And it's gonna could make her life more difficult when you're struggling to pay your bills, or you're struggling to get your credit cards paid off. So you've got to track all your spending. And do it month in and month out. And you get Doom reports through the app, compare it to your budget, there is inflation, cost of things are going to go up. Even if you buy the same things every week. Over time, the cost of what you're buying is going to go up in price, you need to adjust your budget for that you need to increase it. Maybe your grocery bills was $100 a month and that he was plenty of money. And now you have a roommate maybe have a significant other and you buy in for two. So maybe now it's $225 a month. Did you adjust your budget for that? It's not easy to do so. And as you increase one category, look around are the categories that you have budgeted a higher amount that you're not using. Well lower that down. It's a fine tuning process. It takes time. And it's an ongoing process. So the most important thing you can do is keep track of everything down to the penny. You should know exactly how much is going in your checking account how much is going out of your checking account. And that should be the same with your budget. Same thing with credit cards. Quit using credit cards. Quit creating New debt, make the minimum payment every month, increase your emergency fund, build up an emergency fund when you have a couple $1,000 in excess of the emergency fund that you set for yourself, and then take that couple $1,000 and apply it to one of your credit cards and pay it down and do that month in and month out. So keeping track of everything is an important and if you do that consistently, you'll be happy you did so. Just a note, I'm apologizing for any of the background noise that you might hear. In my episode. I was unable to detect and get rid of it.