Do you ever feel like money trickles through your fingers almost without you realising? That sinking feeling of having more month than money is one that’s familiar to most of us as some point in our lives.
And it’s not really about how much you earn either, because we do tend to live up to our means regardless of the numbers in the wage packet.
Changing the way you manage money, and keeping track of spending against earning, is the best way of staying on top of bills, entertainment and household maintenance. You might even be able to increase your savings and you’ll almost certainly have more peace of mind.
Not many of us learn about accounting. It’s not really taught in schools or beyond unless you take a course that’s specifically aimed towards finances or economics. It’s almost like we’re supposed to learn money management just through having some to manage in the first place.
It doesn’t work like that. That’s a bit like saying just because you’ve got ingredients in the pantry, you can cook a great meal.
Well, maybe, but most likely not.
Setting up a simple bookkeeping system to keep track of money is easier than you might think. Just like in business accounting, it’s really just balancing what’s coming in with what’s going out and making sure, as far as possible, that the two meet in the middle.
So, take a notebook or a spreadsheet if you like computer work, and on a fresh page, make just four columns. You’ll fill these in as you make purchases or have income:
- Column 1 is the Date. Just write in the date of the transaction.
- Column 2 is the Item. Write in what you bought or where money came from, such as salary. Items bought can either be specific, like a cinema ticket or general such as groceries.
- Column 3 is the Amount. Write down how much you spend or how much you earned.
- Column 4 is your running Balance. This one is important because it tells you how much money is available at any given time. Start this column off by checking your bank statement, remembering to add in any direct debts still to be taken off. Every purchase must be subtracted from the running total, and every income added.
That’s all there is to it. Start a new page each month, or you can go weekly if you have a lot of transactions. Most people get paid monthly, so it makes sense to start a new tracker for each month. Just carry the balance forward, starting the new balance column with the figure in the old one.
Receipts Make it Easier
Keeping a tracker needs to become a habit, and it’s easy to forget when you first start. Hold onto receipts until you’ve added their details to your records so you don’t have to carry a notebook with you all the time, then you can add each one each evening or every couple of days.
Once the details are safely jotted down in your tracker, you can get rid of the receipt. You only need to keep the paper ones if you need them to prove a purchase. Having the tracker also means you can easily check when a particular item was bought.
Put Your Tracker to Work
The insights you can get from those columns of numbers is where this system really helps:
- Look for patterns in your spending. Maybe you have a splurge on entertainment mid-month, or maybe you pop into the supermarket for top-ups a lot more than you realised. You can find patterns by isolating the categories in your Item column and adding up all the amounts just from that type of spend.
- Find Saving Opportunities. When you can plainly see where most of your money is going, it’s easier to look for ways to cut down. The total amounts spent on a category can be surprising, especially if most of the purchases are small ones. An example might be coffees in work breaks. Just £2 a day on a cup of coffee is actually £40 a month over a five-day work week.
When you see it in start black and white, you can calculate just what you could save by making a few small changes. From there, you can either divert the money into more useful channels, such as paying off credit cards a bit faster, or into saving for something special. Watching money, tracking it, and learning how to control it can be addictive and very satisfying. If you find you enjoy it, it could even open doors to a lucrative new career in accounting.
But overall, it’s a far better and more practical way of controlling money than making tough decisions to cut out things you enjoy when you want to save a bit or spend less.