Part of our personal finance plan for this year and beyond involves tracking where our money is going.
I'm tracking expenses with Quicken and so far I'm keeping up. Automating the download of transactions and not trying to track every last transaction to every single account is helping.
Tracking manually: Old-school, or just old?
Recently a few other personal finance bloggers weighed in with a response to the following question from Money Saving Enthusiast:
Why are people quick to tell people online tools are better than manually budgeting if manual budgeting works for some people?
This is a great question. Manual expense tracking — that is, pen and paper, or at most a simple spreadsheet — certainly can work. It's worked for centuries.
As I was going through a Crown study, part of the exercise was to track expenses. Because the study was meant for a broad audience, the tracking didn't rely on any particular commercial tool. The primary method for tracking was pen and paper. Our facilitators sent us a spreadsheet template for tracking our expenses.
It was guaranteed that we could use one of these methods. We could download Open Office to view the spreadsheet. And if we didn't have a computer (!) we could get a notebook out and add the numbers up with a calculator (or by hand if we really wanted to dust off the mental cobwebs).
A less complimentary way or describing these methods: They're the lowest common denominator. This suggests that online tools or automated tools are better.
Some prefer the manual method; others like automatic expense tracking
Miranda Marquit of Planting Money Seeds uses the manual method. She says: “I'm all about the manual. I use personal finance software that looks a lot like a ledger, but I don't link it up to my accounts. I enter it all in myself.” Andrea Travillian of Take A Smart Step recommends this to her clients: “I always tell people to do it their first 6 months with pen and paper – the only real way to know your numbers. Then move on to the tool for you!” J. Money is old-school, too: “I still track my money via old school excel spreadsheet, but whatever works!”
Eric Rosenberg of Narrow Bridge, however, prefers more automation: “I think the online tools (or desktop, but I use online) because they take care of the heavy lifting for you. Pen and paper take too much time and can't be accessed on the go.”
Todd Tresidder of Financial Mentor is pragmatic: “Judge by results, often harsh but always fair. Whatever works is what matters.”
Is there a best way to keep track of expenses? It depends
I think this is where I fall right now. I have tried to do things manually, and I've missed the mark. Call it squirrels in the head, or lack of follow-through, but the one-click update from Quicken for most of my accounts is really nice. And I know that I'm not going to fat-finger an amount if it's downloaded. I still make sure the expense categories are accurate, and this involves splitting a transaction into its components. But those are only a fraction of the transactions we do, so it's manageable. I'm trying to keep things simple enough to stick with the process, but not so simple that I miss the ability to analyze where our money is going.
That's me, but it's obviously not everyone.
I know that there is benefit to tracking expenses. Track them in whatever way that works for you. If it's not working for you, try something different until it does.
I still use pen and paper for a great deal of things. There’s some about using a pen that alters you way of thinking compared to use something digital. It’s also a lot faster whipping out a note book than waiting for something to load.
Yes! That’s true. Pragmatic Thinking and Learning by Andy Hunt gets into that topic (and lots of other topics). It fires up a different part of the brain to write things out longhand.
Personally, we like to use a sort of combo method. We budget using a pen and paper, but we use our online banking accounts to track what we are spending. It works great for us!
Cool! At this point for us there’s too much guesswork in the numbers to come up with a decent budget. Little steps.
I do everything on an Excel spreadsheet that has been developed and evolved over the last 10 years. As such, switching to anything else just involves too much change from the way I like it. I have no issue with those who choose to go the route of using software or a website tool, but it’s not for me.
Do you offer that on your website? Seems like you could build a product around that … 🙂
Like many people, I use a hybrid approach. I’ve used Quicken for more than 15 years. Having things in some sort of electronic database allows searching and comparisons and so forth that are clumsy with spreadsheets and nearly impossible with pen and paper. On the other hand, I don’t feel like I have use every feature of the software just because it exists. I’ve actually gone back to manually entering credit card transactions. Downloading is nice in that you avoid mistakes with the numbers, but the categorization is horrible and so I need to adjust nearly every transaction anyway. This negates the advantages for me. Manually entering them just provides me a more orderly way of entering the categorization data.
I’ve had arithmetical errors bite me too many times, so I do like the automatic downloads. Don’t know if there’s any way to get around the categorization problem. Even with accurate categorization on the credit card end, some stores “mix” the categories too much (like Walmart) so I end up going back to the receipt anyway.
I think you should use whatever works for you! Most people gravitate to their comfort zone or what they feel they are most comfortable. I have used spreadsheets for years, so I would use Excel. I like how it is easy to use, but manual could work too. Let’s not forget that it is the questions you should ask not the numbers that are important. Whether it is manual, Excel or some app, it is just a tool to make the budget.
I see “using Excel” and “manual” as basically the same thing, though not everyone does.
I use Mint but I also use a google doc because I like to track different things, and also because it’s empowering to change a spreadsheet after I make a payment. I’m SUPER COOL.
🙂
Some people prefer desktop or online tools, others are comfortable with a pen and a paper. Regardless of the method, it’s great that families keep track of their income and expenses. Mu husband and I are using this software called inexfinance because it works best for us. I’m sure that one day we’ll finally get out of debts and enjoy a debt-free life.
I have always used the pen and paper method. I have just recently been thinking of using Quicken. I don’t think it really matters what you use, as long as your system works for you.
Yeah, I can do arithmetic with calculator and/or long-hand, but it is nice to get the transactions from many of my accounts with one click.
What a timely post for me; manual budgeting worked for me for YEARS, but during the course of 2012, it just stopped being an effective, efficient way for me to track my spending. So, I just signed up for a free account with Mint. I’m pretty new to it, but I really like how it compiles all my financial data in one place!
Glad you like Mint! Don’t know if I’ve ever really tasted the fruits of success yet, so I’m looking forward to it. 🙂
I was more inclined to use pen and paper, but I know that isn’t very practical so I’ve moved to using Excel to keep track of my expenses. It has worked for me and I’m contented with it. Everyone should use what works for them.
Amen!
I use the application You Need A Budget to keep track of my spending. Anytime I spend, I enter it either via the software on my laptop or via the iPhone app. Everything is linked up via my Dropbox account.
So, not only can I see how much money I have in all of my budget categories, I can then record transactions on the fly when I’m out and have my budget levels adjusted.
Right now, if I don’t feel like cooking dinner tonight, I can look at how much money I have left in my Restaurants category for the month. I can then decide if I want to pick something up on the way home or if I would be better off cooking.
I have a two prong approach… Mint to pull all of my information into one overall view, and YouNeedaBudget for budgeting. I used to use excel until I found YNAB three years ago. I’ve never looked back. Wife and I have our monthly budget before the month starts and after some practice it takes us less than 15 mins a month. We love it!