Tracking Your Way to Financial Freedom.

Have you ever worked out how much you earn and then subtracted the amount you spend only to find that the figures don’t add up? Where did that unaccounted spending go? And what difference would it make to your finances if you still had that money in the bank?

Everyone wants financial freedom but not everyone is willing to do the simple things that will enable that dream to become reality. One of steps many people leave out but which is so important is tracking their spending.

Why track your spending?;

This is the obvious question – why bother tracking what you spend? Here’s why:

1] You’ll know how much you spend and where you spend it.

By tracking our spending we are able to pinpoint where our money goes and it becomes easier to control. And control is vital. We’ve often mentioned the alarming reality that, on average, New Zealanders spend $1.17 for every dollar they earn (Dept of Statistics website). Such overspending has a devastating effect on our finances and is crippling many people.

The reality is, most people think they know where their money goes but, in reality they are not really in control of this at all. By setting aside just ten or fifteen minutes a month to set up a tracking system and monitor it, you will soon be able to accurately pinpoint what you are spending your money on.

2] You’ll become more conscious of your spending.

The fear many people have about spending plans, budgets, tracking their expenditure and the like is that these things are designed to curtail their spending and so ruin any fun they might have. The object of the exercise is to actually free you up so that you are more conscious of where you are spending your money so that, ultimately, you can have the cash to buy the things you really want to have. Having said that, most people who track their spending will report that being more conscious of spending means they save money – often a lot of money.

Two answers to tracking your finances.

THE FIRST ANSWER: USE CASH:

Cash can be awkward and in this electronic day and age I’d not suggest using cash for everything. However, if there are areas where you constantly overspend, cash is a great way to monitor and control it.

The most common areas of overspending for people are groceries and those impulsive extras (those coffees at the local cafe or quick snack in the food-hall at the mall). For you it may be some other area. It may be clothing or plants for your garden. Whatever area it is, if you are struggling with overspending, the way to control it is very simple – work out a budget you can afford and withdraw that money each fortnight or month in cash.

At the end fortnight or month, one of two things will have happened:

You may have cash left over. If that is the case then you have extra for next week (or you could put it into the bank and save it).

Alternatively, you may run out of cash. If that happens you can either stop spending in that area or you can get more money out of the bank. The important thing is that you know how much you have spent at the end of the fortnight or month.

After about three months you will have a better idea of how much you spend in each area. You can then either budget for that amount, or you can look at ways to cut back spending in those areas.

THE SECOND ANSWER: GO ELECTRONIC.

There are a few alternatives here. One is that, if you are savvy with a programme like EXCEL or MS-Money, you can organise your own spreadsheets – but there are easier ways. There are a number of money tracking programmes on the Internet.

One is ASB’s new Track My Spending money tracking programme. It is very good and enables you to code your expenditure before it produces a pie-graph showing you just what you put into your account and where you spent that money. The great thing about it is how quick and easy it is to use – the not so good thing is that it is only available for ASB customers. If you are an ASB customer, you can check it out at www.asb.co.nz. 

Another excellent and even more comprehensive tool is the New Zealand site Who Stole My Money. Each month you upload your latest bank statement and the programme does the rest. It does all the maths most of us would find a little daunting and spits out a graph that shows where your money was spent. It’s great because it remembers your codes. What that means is, once you have told the programme that spending at, say, Daisy’s Cafe is entertainment – it will remember that every month until you change it. That means, eventually there is no need to tell the programme what you have spent money on – it works it out for you. You can check out Who Stole My Money at www.whostolemymoney.com.

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