Tracking

What is tracking, how to do it what do you need to track personal finances.

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Transcript

Charles McDonald: 0:03

Chuck, hello, I'm your host. Mr. Chuck, a retired accountant turned truck driver, I reduced my debt in a relatively short period of time. Debt reduction to achieve financial freedom takes commitment, confidence, determination, tracking what is tracking, how to do it and what you need to track personal finances. This is step one in getting your personal finances under control. It doesn't matter if you're trying to pay off debt or save money for down payments of a home or car or college education or whatever your goals are in life, you need to track and personal finance monitoring is what it really is. You got to know what's going on in your personal financial life. If you track you'll know your monthly bills when they're due and how much they are. If you're renting, you know when your rent due. You'll know when your utilities are due, and whatever expenses you pay on a monthly basis, you'll know the dollar amount, who you owe and how much it is, which is very important, because you have to know this kind of information before you go out and borrow a bunch of money. That's how people get in trouble. They don't know what's going on in their personal finances. They don't know what their monthly expenses are. They may know, well, I pay $500 a month rent. They're sitting there trying to finance a car, and it's looking at 800 $900 a month car payment. And they ask them how much you make and how much you pay for rent or whatever, maybe your mortgage or rent. They don't ask you what your utilities are. They don't ask you what your insurance kind of cost. They don't ask you what you spend on food or entertainment or anything like that. They don't really care. They're just looking to make a sale. But you have to know everything that's going on in your life before you make a big financial decision on borrowing that kind of money. How long is the loan for? How is it going to affect your monthly budget? If you don't know what your expenses are, you don't have a monthly budget. And how do you do that? The step one in getting your personal finances under control is tracking. Before I get into the mechanics of it, I assume that everybody has some type of computer. I'm not talking about on your smartphone. I'm talking about a computer at home where you can load in some software or do it online. You don't even have to download these this software anymore. You just go online and log in and, well, there it is. You don't have to worry about updating it or anything like that. You just got updating the software. You just got to learn how to use it and put your information in there. And they're very secure. Okay? Personal Finance Tracking is a symptomatic process of recording, monitoring and analyzing financial transaction, income and expenses, to gain insight into one's financial situation, identify air areas for improvement and make informed decisions about budgeting, saving and investing and also borrowing. Effective Personal Finance Tracking involves recording transactions, accurate logging all financial transaction, including income expenses, deposits, withdrawals and transfers from various accounts, says, bank accounts, credit cards, loans and investment any place that you're making a payment to or making, you know, like your checking account, your savings account, your credit cards and your any loans you're making payments to maybe it's good to track that monthly payment so you can look at the detail and see what's going on. How much are you gaining on paying that loan down, and how many more payments, or how many more years do you have before that loans paid off? And investments. Yes, how much do you have in your emergency fund? How much you have in your investments? What's your goals? How you're doing, those are the things. Is why you record your transactions, categorying expenses, grouping transactions into categories such as housing, transportation, food, entertainment and savings, to understand spending patterns and identify areas for reduction. If you're spending more on entertainment than you are for housing, you're you have a problem. You need to view these things. You need to know what percent of your income is for housing, and housing includes either rent or the mortgage payment. If you're buying, it would be your real estate, taxes, your insurance and all your utilities and any repairs or maintenance that you may be doing, tracking net worth, monitoring the total value of assets, such as savings, investments, property, minus liabilities, debts and loans to gage overall financial health, you know your net worth, everything you own less, everything you owe is the net amount. So say you own a home that's valued at 100 $500,000 and you owe 450,000 your net worth would be $50,000 the small, the less you owe, the more your net worth. That's why this podcast is called reduced debt, increased wealth. You reduce your debt, your net worth going up, and that's the only thing you do. You're going to have a larger net worth. Course, once you get your debt under control, then you increase your investments, and your net worth is going to grow, setting financial goals, establishing Specific, Measurable, Achievable, Relevant and time bound goals, such as savings for a down payment, paying off debt, or building an emergency fund. Building an emergency fund and paying off debt, you can do those two goals at the same time, and once you have those things achieve increase in your savings for whatever you want to use it for in the future would come after that, analyze and adjusting regularly reviewing financial data to identify trends, patternings and areas for improvement and make an adjustment to budgeting, spending and saving habits accordingly. Look at where your money is going. Now. Are you spending too much in entertainment. Where can you cut back in entertainment to reduce that down, to get it in line with what you should be spending? I'm not saying you don't do entertainment. I just say 90% of your income should not be towards entertainment. You need maybe 10% it's a matter of control, keeping your finances under control, securing data, ensuring the confidentiality and security of financial information by using reputable personal finance tracking tools and following best practices for password management and data protection. Personal Finance Tracking can be done manually using a spreadsheet or a paper based system, or through digital tools and apps such as budgeting software, expense trackers and financial management platforms, by adopting a consistent and comprehensive approach to personal finance tracking, individuals can gain control over their finance make informed decision about spending and saving, achieve financial stability and security, work towards long term financial goals. Maybe your financial goal is nothing more than paying off your debt. Maybe your financial goals are a lot more than that, but whatever it is you want to do in your life, you have to track and once you start, you can. You don't ever stop. You do it as long as you can. Then when you're unable to do it, then you have somebody else do it for you. Knowing where your money is coming from and where your money is going is the most important thing you can do to keep your financial life, your personal life, whether you're married, dating or whatever, under control so everything's happy. Most married couples fight the most over money, whether it's not having money or spending too much, or whatever the case. If they were tracking their expenses and they would show each other and sit down once a month and review the data, this is where you spend your money. Can you cut back? Because here are expenses that we have to pay. We have. House. We got all these expenses. We got two car payments. We got we got to say, money. We got paid off this debt. We need to cut back on spending. Where can you help me by spending $100 less this next month? It's working together and finding a solution where you can get everything and keep everything under control, so that your personal life doesn't get out of control. When I was younger, I did the approach that probably everybody's still doing. I get a paycheck. I'd pay whatever bills I had to pay between that time and in my next paycheck, I would have says certain amount of money I would save for maybe groceries and gas for the car, and I thought I had on a control and maybe I had a one credit card or two credit cards I owed on, and I would save, I would make my $40 minimum payment, but I also would apply $50 extra, and then before the next payday, I'd run out of money, and I would struggle, and I would have to maybe not pay somebody or get a cash advance on my checking account and pay those fees, and it just kept getting worse and worse and worse. I could never figure it out, because every time I started to get ahead, something bad happened, and I never really had a significant savings to handle whatever bad would happen, whether was I needed tires for the car or brakes for the car, whatever the case, or if I was moving, I need deposit for a down payment before I got my deposit back from where I moved from, all those type of things. And it was difficult, and I was always struggling to pay my bills. Then I and I was tracking some but I nearly didn't do the budget thing because the software wasn't all that great, or I never figured out how to use it. And I would put numbers in there that I'd just guess maybe I'd look back the last 30 days, plug some numbers, make some educated and it was never really close. So I never paid much attention to it, but I still, you know, knew what the balance was in my checking account. I knew where my money was kind of going. That's about it. You need to have this under control at all times. Once I started my program to pay off my debt, where it was a process of building up my savings in my emergency fund and keeping cash available in case something would happen, and quit using credit, I was able to slowly start bringing, bringing in my credit card debt and start paying it down. And when something bad would happen, I had the money to pay for most of it, if not all of it, which kept me from using more credit, which then once I got through that, I would rebuild up my emergency fund, and I would continue on paying down my debt. I paid off, I believe it was like $135,000 in three years, eight months. I remember that to a team, and that was car payments, that was credit cards, that was my line of credit on my home and my first mortgage at the now, don't sound like much, but I was only making 35 to 50,000 a year. My best income year was maybe 60,000 so I was able to ring in my debt by keeping my personal finances under control, by tracking and then doing a budget, and we're going more detail on how to do a simple budget, and then having a plan to reduce and pay off my debt, that's all it's gonna take. But tracking is getting more detail you. I want you to use an app. If you do it manually, it's so much work, you'll probably give up on it. But if you use an app, you can generate reports, which makes life much easier, and you can generate reports that help you to your monthly budget, which then you can see all the numbers and all the in the major categories and how they relate to your overall personal finances. But once you start using the app, I mean, I say use an app because it's going to have categories pre set up where you just need to select the categories you want to use. It's going to have reports set up for you, or it's going to have a way. For you to do reports way based on what you want, and it's just a matter of trial and error to learn how to use it to get reports and information out of the app that you want, but it doesn't do you any good if you don't put any information in there. I did not and do not recommend automatically downloading and connecting any app to your bank account, one because you run the risk of them stealing your data, hacking your the app, and then stealing your bank information. But you have to manually enter the transactions, that's way you start remembering where your money is going. You know if, once you start entering it, you'll be more aware of what's going on in your personal financial life. And that's the goal here. If you automatically do it, you might have hazardly go through there and select some categories, and it won't make sense. If you manually do it, you'll see what's going on. But here's the good news. Once you enter a transaction, say the name of your mortgage company and the dollar amount and the date it's that you paid it, the next time you type in that mortgage company, it's going to pop up. You might have to put the dollar amount in and change the date, but it's going to have the right category, the same category that was selected the first time. The other option when you enter it the first time, you can set that up as a recur reoccurring entry that's gonna pop up once a month on about the same day. Now you can have it pop up a couple days earlier and always review it. Don't have a post directly to your checking account, because that makes it hard for you to reconcile your balance. When I say reconcile your balance, the balance in this app for your checking account should match the balance on your bank account, on your online bank account, and that's true for everything that you enter in there, whether it's your checking account, your savings account or a credit card, all your balances should always match. If not either entered something wrong, or you haven't entered something or you maybe entered something twice, that's how you make sure that you got all the correct information in there. Now, most of these apps you'd be using, you might be able to go in to your category list and rearrange it or group them so it's going to match how you're going to set up your budget. Your budget is generally set up by categories, transfer or housing, transportation, food, credit and savings, entertainment, maybe in other insurance, you can go in to the category list on your tracking app, group them together, like your housing, your mortgage payment, your house insurance, your real estate taxes, all your utilities, and you can be grouped under housing. So when you do a report, you get one the total for housing, but you also get all the detail by category that's related to that category housing. Same thing with your transportation. Maybe you have two cars and two car payments. So you have car a, car B, you have the car payment, the insurance, gas and oil and maintenance on car A, and the same thing with car B. So now when you do a report, you have the total for transportation, but you also have the total for car A, the total for car B, and then a detail that goes along with that. That's helpful, because if let's say that your transportation category, you're comparing month to month, and all sudden, it's way high. Well, what happened? Maybe you remembered your car broke down. You had to get new tires, or had to get in transmission replaced or some major expense. Maybe you can remember it, but maybe you don't it can go in there you go maintenance and parts a big amount. Oh yeah, that's right, this car broke down and I had to get it repaired. So it helps. You know that was a one time thing. I don't need to adjust my budget for transportation up because I was on one time thing. I went over my budget for this month. But that's not going to happen for a while in the future, until another car breaks. Down, or whatever the case may be, but you see where I'm getting at the more detail you have, the more information you have, you'll be able to get the proper reports to do your budget, which helps you identify and keep track of your personal finances. I'll be back in one moment with my final thoughts are the articles I refer to in my episodes have a link in my show notes. If you're interested in checking out the software that I personally use to get my data control. It's in my show notes under shop financial, you need to copy and paste the link and it'll take you to the website. Any questions, you can just contact me through that particular website. If you value this podcast and would like to make a contribution, I had a contribution link in my show notes. Also get whatever you feel is appropriate for the information I am providing. I thank everyone for listening to my podcast. This episode was talking about tracking why you track why you want to do it, and kind of how you do it. You need to have an app to do it so it's got a lot of the stuff set up for you. You add your checking account and whatever accounts that you have, which will be checking savings and all your credit cards that you currently have a balance on, whether or not you put your mortgage and loans in at this time is not all that important, but you can do it if you want to, but you might want to do it in the future. The idea here is to know where all your money is coming from and going to and how you paying for things. Are you making monthly charges on your credit card to pay for monthly expenses such as utilities or whatever? Are you able to pay it off, or maybe you got behind. And then the second thing is to generate reports to help you understand and detail what's going on. And the generating reports is going to help you with setting up and maintaining a monthly budget. That's why you need to track if you don't know what's going on with your personal finances, but you think you do, sit down without even looking at anything, when's your rent due or your mortgage payment due? What's the date, what's the dollar amount, and who do you pay? How much is your electric bill a month? How much is your natural gas bill? How much is your internet bill? How much is any bill that you pay on a regular Can you sit down and write down the dollar amount that you pay? And this is a change. It's the same every month, or does it change every month? And how much does it change? Does it in the summertime, we know electric bill is going to go up because of air conditioning. And in winter time, we know electric Bill's going to come down, but your natural gas bill is going to go up. If you have natural gas. What's your car payments? And when are they due, and who do you pay them to? How much is your insurance for your cars? How much is the insurance for your home? If you cannot sit down and write those numbers down, you need to be doing some tracking, because you don't know what's going on in your personal financial life, and that is a must if you want to pay off your debt, if you want to save money for to meet your future goals, you got to be tracking. If you want to have any type of budget, you have to be tracking. I'm not saying get a app that's really expensive. My app I use is less than $10 a year. There's everything I need. I don't use it to do my budget. I do my budget on a spreadsheet, but I can generate reports from my app to give me the numbers to put in the spreadsheet, which makes it easier and fast and doesn't take any time at all. Once you get in the habit of doing the more transactions you have, the more often you need to update your app, your four year tracking. So net, whether you do it once a week and it takes you 10 minutes, or you do every other day, and it takes you two minutes. You have to do it in F to keep everything up to date on a regular basis. And if you use this app to see how much money you have in your checking account, you need to have it up to date instead of going. Online to a bank account. You can look at the app and know, I have $300 I get paid tomorrow. I have I gotta go to grocery store, and it's gonna be a $250 bill. I can cover it. If that app is up to date, you can do that. If it's not, you can get yourself in some trouble. We're trying to save money here by not paying unnecessary bank fees, such as overdraw fees, whatever the case, ATM fees, we're trying to minimize our spending so we can maximize our savings, and by tracking we'll help you achieve both of those and you glad you did so do?