Tracking Your Finances: Tasks and Tools

Tracking your finances is an essential personal finance skill, and one of the first we learn when first dealing with money on our own. Tracking involves more than just keeping an account register – some form of analysis should be applied to determine how and where money flows.

The end result of applying the principles of successful money tracking will be a well-built system that is tailored to your specific needs and work habits. Without too much effort, you should be able to see your detailed spending and account balances (at minimum).

So what exactly do you “do” during financial tracking? Over the last few months, I’ve written about the importance of optimizing your contact with money, and setting aside specific periods of time for financial planning. Here are a few tasks that are critical to perform during this time:

Financial Tracking “Tasks”

These are items you should strive to accomplish as frequently as warranted. As a rule of thumb, the more financially challenged your situation, the more frequently you should monitor things to ensure progress and compliance with your goals.

• Paying Bills
• Reviewing Transactions
• Checking Balances (Every few months to a year, you should also check your net worth.)
• Analyzing Cash Flow
• Analyzing Expenses & Your Budget
• Reading Statements
• Transferring Funds (to savings and investment accounts and between spending accounts)
• Monitoring Investments

Schedule tracking time based on your personal financial health, and make sure you are getting to it every time you need to!

Traditional Tools

Let’s talk a little bit about the tools available to accomplish the above tasks. If you’re “old-school” and like to use the convenience of tools you already own (a spreadsheet or paper), you may enjoy these:

• Spreadsheets – Using Excel or an alternative software, you can create an adequate tracking and budgeting system at home. For ideas and templates, visit this, this, and this. Tracking using spreadsheets involves a bit of work to customize and start, but the result is a system that is precisely built to your specifications. One downside is the relative lack of reporting tools that you get with full-featured applications.
• Notebooks – Gone are the days of physical checkbook registers, but some still love the idea of taking pen to paper. If you are creative enough to keep a financial system by hand, a notebook is a great place to store all of the information.

Online Tools

The proliferation of the Internet has enabled many companies to develop applications that download your bank information and present you with some sort of analysis.

Each application has a slightly different way of analyzing and presenting your data. Some are free, while some require a small monthly fee (don’t be put off!). Analyze what you feel is best for your situation and try it out.

• Mint – One of the newest and also most well-known online aggregators of financial information and analytical data. Free to use.
• Mvelopes – An envelope-based budgeting, bill pay, and account tracking system. Read my review of Mvelopes.
• Quicken Online – Quicken’s entry into the online management market. Feature-rich and a good system for beginners. Free to use. Merged with Mint.
• Google Docs – If you’re fond of the spreadsheet method described in the previous section, but want something that you can access anywhere, consider Google’s documents service.

Software Suites

In addition to the paper methods and relatively new online tools available, there are some tried-and-true (and also newcomer) programs that run locally on your machine. Here are the most well-known:

• Intuit Quicken (Current Version: 2009) – The software running my own finances for the last 10 years. Does nearly everything you’d ever need when it comes to your money.
• Microsoft Money (Current Version: 2008) – Microsoft’s answer to Quicken, and used to be the other “big player” in the personal finance arena. Microsoft has discontinued the product after the 2008 release.
• You Need a Budget (YNAB) – Envelope-based budgeting software that promises to revolutionize the way you deal with your money. Mvelopes’ biggest current competitor.
• iBank – Competitive personal finance manager, available only for Macs (from IGG Software).
• Moneydance – Another alternative for the Mac, also available for PCs.

Final Words

Tracking your money is an important task, and a fairly simple one when done on a regular basis. Don’t procrastinate dealing with your money, or it will eventually catch up with you.

A healthy tracking system is an integral part of every healthy financial life!