Author: Phil B
So you’ve finally decided to start tracking your spending for a month or two, so you can identify where all your money is going. Congratulations, that’s the first step toward mastering your money. Anything that is measured can be controlled.
Well, there’s some good news and bad news about tracking your spending.
The Good News First
As I said above, yeah, tracking your spending is an absolutely great idea. It’ll will identify where you’re spending too much, and help to identify costs you may not have seen otherwise. Such as bank charges. Perhaps it would identify that your habit of using other bank’s ATM’s is costing you a lot of money in bank fees. That’s one of the things it did for me.
The Bad News Second
So you decide on a method. Maybe it’s a bank book, maybe you’ll use quicken, but whichever, you’ll update it every night.
Ouch, that is going to be a tough habit to get into, and can be so easily derailed.
But if you leave it much longer than that, then the work involved is going to increase.
The second bad news is called the Hawthorne effect. They discovered this in factories that whenever workers suspected they were being watched, they worked more effectively, and so what management was attempting to monitor and qualify was affected, rendering the data inaccurate.
The same thing will happen as you attempt to track your purchases. Knowing that you’ll be writing it down later, maybe you’ll skip stopping by Tim Horton’s on your way home.
Now, granted, that is also a good thing. You’ve adjusted your habits before even really starting, but the data you’re obtaining is now a less accurate representation of how you actually are spending your money.
The Great News Last
To recap. You want to track your spending, but you can’t track your spending without affecting your spending, and it’s also a lot of work to get into the habit of doing it.
Well, as the headline says, there is some good news here. If you have online banking, and if your bank is not a mattress or tin can buried in the back yard then you probably do, then your bank has essentially been tracking all of that for you.
Obviously, this is only if you’ve been using your debit card, if you’ve been living in cash, then you will have to do it the old fashioned way with receipts .
Now you can simply sign into your bank account, and find the option to download the data in a CSV file, which is compatible with excel. It may even be possible to download it straight to the program you use, or have mint.com access your data.
The Bad News About The Great News
Now, the data you’ll get from your bank is just where you spent money, how much, and what day. So which ever program you’re using, you will now have to go in and identify what it was for.
Also, the more data you download, I would suggest no more than 3 months, the more items you will have to try to remember what they were for. Why did you go to the pharmacy 5 weeks ago and spend $3.29?
Luckily, the bad news about the great news also has good news. By assigning categories to your costs, categories like ‘groceries’, ‘gas’, or ‘snacks’, you’ll be able to identify 90% of what you spent money on almost right away.
$100 at Safeway on a Saturday, probably groceries. $75 to Telus, probably your phone bill. $50 to a Shell station, probably gas. $10 to a shell station, probably snacks.
The key part of the last three months though, is when it identifies what you didn’t know you were spending money on. Like when I noticed I was spending a lot in bank charges simply from using another bank’s ATM’s, or when you realize you’re still paying for a gym membership.
All of that data is available to you right now, and can be found with a few minutes of sorting in excel.
Photo Credit Flickr/ArtbyHeather (CC 2.0)