About a month ago the folks over at Make Love, Not Debt did a series about how they divide their money and track their accounts and spending. I’m not married, so my accounts are a bit simpler, but I was surprised to see how similar their methods are to mine!
So, here is what I do. I use a modified method of the 60/40 plan, so what I spend day to day comes from my “Fun Money”, which is 10% of my take home pay. Since I get paid weekly its easy to track. I don’t use cash very often (go ahead, gasp!) so what I use to track my spending is like a checkbook ledger that I keep in my wallet. (Mine actually came with my wallet with some refills, but you can actually print out something like it at pocketmod.com.) What I found in the past was that it was hard for me to bring together my expenses from my different cards (I used two, one Visa w/ rewards, and one Amex w/ rewards) and from my checking account, but this method consolidated all of my spending.
I start tracking on Fridays since the bulk of my spending occurs on the weekends, so every Friday I “deposit” 10% of my pay into my ledger. Whenever I spend something or buy something I put it in the “Expense/Withdrawal” column and adjust the remaining amount. That way I have a “real-time” look at how much money I have left. I don’t have to wait until the store reports it to my credit card, and then wait until the website updates. If I take out some cash I do the same thing, put it in the “Expense” column. I don’t individually track cash transactions, since I sometimes lose change or put it in my coin jar, or who knows what…its just easier for me that way, and I am sure that I’m not counting it twice as an expense. At the end of the week (on the next Friday) I will either have spent too much (in which case there’s a big NEGATIVE total staring at me, and I make up for it on the next week), or I have money left! If thats the case I immediately deposit it into my “Extra Savings” account, which I use for birthday or Christmas gifts, and the account goes back to zero until I “deposit” the next week’s money. The only thing I always have to remember about are automatic charges, such as Netflix.
A few months ago I realized that your credit reports show you HIGHEST balance on your credit cards, regardless of whether you paid it all off that month or not. I can’t confirm if they use that number to calculate your debt/credit ratio, but just seeing that number there alarmed me. So, since I realized that I’ve been paying my balances week by week. What that means is that every Friday I log into my credit card(s) and pay off the balance. (Keep in mind, I have to be sure not to overpay the credit cards, since the money I spent may need to go back to my checking account or possibly to another credit card! This is how it gets a little complicated, but you learn to figure out what works for you.)
Since my budget is pretty simplified — all my expenses including eating out and clothing come out of my “Fun Money”– thats how I’m able to keep just one ledger for my spending. Gas and tolls are excluded from this, as I have a separate line item in my budget for them, as are medical expenses. If I’ve budgeted for a large item (such as a gift) I charge it on my card, and once it has posted online I pay it right away. That keeps my balance down, and it ensures I don’t forget about it and spend the money on something else! I know its a little “involved”, but thats how I like it. It makes me feel like I’ve got it under control, and everyone works differently!
So, how do you track your spending?