It’s Thursday after work and your friend sends a text about going to Margarita Night at the local Mexican restaurant. You decide you want to unwind with some tasty arroz con pollo and a refreshing margarita or two, so you reply, “sure”. You pull up your bank’s app to check your account balance — $106.26. “Where did all my money go?!” you think to yourself.
According to a Gallup poll from 2013, only about one in three Americans actually has a household budget. I would say this statistic is still accurate because less than half of the people that come to me for help actually keep track of their cash flow. When I ask those who don’t, why they don’t, the standard response is, “I look at my online banking every day so I know how much I have to spend”.
This is partially true. Your online banking application does tell you how much you have available to spend right now (according to their records) but it doesn’t tell how you are spending your money. If you want to get a better grasp of where your money is actually going, you’re going to need to actively keep track of it.
Reasons To Track Your Expenditures.
Banks make mistakes. I worked at a bank and I saw this first hand. While it isn’t a common occurrence, it still happens. It may not even be the bank’s fault. It could be a merchant that double charged you by mistake.
Some merchants charge more or less than the actual transaction. A prime example of this is gas stations and hotels. When you select debit/credit at the pump, the gas stations will put a temporary $1 pre-authorization charge on your account. This way the vendor can verify the card is active before authorizing the total amount. So you really put $20 in your tank, but your pending transaction on your online banking will say $1. After the transaction is authorized the $1 will fall off, but that could be minutes to hours after you actually filled up. A lot can happen in a few hours.
Fraud. A thief gets a hold of your card number and proceeds with a spending spree. A lot of times a thief will charge a few small items first. If they get away with it, they go for the big time items hoping that you don’t catch it until they are scot-free.
Paper checks. Paper checks may not be used very often anymore, but we still use them occasionally. Like that $20
It will help you budget. The dreaded “B” word. I find knowing where your money is going is integral to formulating a budget. If you know that you spend $200 a month at Starbucks, you have a benchmark for how much you want to cut and spend somewhere else.
How To Keep Track Expenses.
There are multiple ways to keep track of cash flow; all the way from the basic check register to apps on your phone.
Doing it the old fashioned way of balancing your checkbook takes a little more time and effort. You will need to keep the receipts from any transactions you use your card for and write them down in a check register. If there are any outstanding checks or pending transactions, they won’t be checked off until they actually post to your account, but they still should be subtracted from the running total.
Apps like Mint,
Stay On Budget.
Keeping track of your cash flow is an important step in helping you create, and stay on, a budget. When you know where your money is going, it is easier to ensure you have enough money for the things you need. It’ll also help you pay off any debts you have and keep you out of debt going forward.
Living on a budget doesn’t mean giving up things you want or like. You can enjoy the occasional iced latte and still find places to cut back in order to balance your income and expenses