Personal finance management is undoubtedly one of the most beneficial skills to have nowadays. Whether you’re a part-time worker or a home-based freelancer, keeping track of your expenses is essential on your journey towards financial independence. Since school didn’t teach most of us how to navigate bills, purchases, and debts, it’s up to us to strike a good balance and keep ourselves afloat money-wise. In that spirit, we’ve designed this guide to help you cultivate good personal finance practices and provide you with convenient ways to monitor your purchases automatically, all year long. Some adjustments may be in order!
Inventory Your Accounts
Before you can start tracking your monthly expenses and purchases, the first step involves examining your financial habits. As our elders often caution, money is hard to earn but very easy to spend. As such, taking a good look at your checking/savings account balance and credit card statements should help you identify your typical spending patterns. It’s imperative that you get a precise idea of your monthly cash flow, i.e. how much money is coming in and where it’s going out. From then, you’ll be able to take action and adjust your spending behavior if needed.
Categorize Your Expenses
If you want to win the money game, invariably, budgeting is the name of the game. Sadly, too many people overlook this fact and end up not making ends meet at the end of the month. Now, no matter how large an income you’re earning at present, the key to a sustainable financial situation is to create a budget and categorize your expenses. Allocate an envelope to each monthly spending category, such as rent and utilities, groceries, transportation, clothing, leisure, and savings. In doing so, you have ultimate control over what you spend and avoid living above your means, which will help you fulfill your goals faster (saving to travel, buy a car, a down-payment for a first home, etc.).
Download An Expense Tracking App
Now that we’ve covered the essentials, we can delve into some effective money management methods. One reliable way to manage your finances is to automate the purchase and expense tracking process using a dedicated app. These tools work similarly to a personal bookkeeper. As the money experts over at keepertax.com point out, freelancers and self-employed individuals, in particular, can benefit immensely from these convenient software solutions to stay on top of their finances. Most of them allow you to link your bank account or credit card for the app to monitor your purchases, whether it’s work supplies, a restaurant bill, or an online subscription.
What’s more, the best services automatically verify your eligibility for tax-deductible expenses, saving you loads of money in the process. In any case, be sure to conduct enough research and compare different providers to land the best deal and enjoy a seamless tracking experience.
Use Other Expense Trackers
For those who can’t wrap their heads around the convenience of a paid financial tracking app, there are other ways to monitor your expenses. That said, they won’t work as smartly or efficiently (still better than pen and paper, though!). For instance, many people like to use spreadsheets. They create their own worksheets or find financial templates to download to input all their monthly expenses neatly. This can be done for everyday purchases, special occasions budgets, business budgets, and more, using Microsoft Word, Google Sheets, or OpenOffice. In truth, nothing beats the convenience and utility of a dedicated software, but spreadsheets can be a great alternative for those who want even more control. The quid pro quo is that there’s little automation, and you’ll have to enter all your expenses manually.
Identify Areas Of Improvement
Last but not least, using an automated or semi-automated financial monitoring tool allows you to see the big picture at a glance. By keeping tabs on your daily expenses, you can pinpoint where it is that you spend the most, and make adjustments accordingly. It helps you recalibrate your different budgets, prioritize certain payments, and ban costly expenses. Down the line, this is bound to grant you better financial management. While you can still do this with physical bookkeeping, automation makes the task significantly easier.
All things considered, there is no shortage of options when it comes to automating your purchase tracking process. Whether it’s paying bills, making car payments, or buying your partner an anniversary gift, you can take control of your finances with just a few simple steps. Remember that financial discipline is not easy to acquire; however, with a help of a dedicated tool, you’ll develop good money management practices that will last a lifetime!