I’ll reveal to you the #1 cause of our money management problems and give you a quick review of four different tools to stay on top of our cash flow. You’ll also get a free downloadable cash flow worksheet to get you started! As you know, there are massive loads of information about how to manage money, how to budget, how to save money, and how to live a debt-free life. It can be overwhelming and paralyzing! Let’s keep it simple and focus on the top four ways to go about cash flow.
What’s the #1 Mistake?
When we leave the house, we make one big mistake. I’m going to make this simple for you. The very first step to doing anything with your money is to know what to do with it before you leave home or get online.
When it comes to keeping track of our money you either love it, hate it, or are half-*ssed about it. And for most Americans, this can be a real pain in the butt. It’s not really the task at hand, but it’s the mind that messes with us. We know we need to do budget, but we just don’t want to. Hence, we find ourselves in a hole deeper than we want to be.
A survey, conducted by Slickdeals.com asked 2,000 adults last August about their money habits. Topping the list of categories where respondents overspend is online shopping, followed by grocery shopping and subscription services. Take a look at their list, you may find some things surprising.
- Online shopping 40%
- Grocery shopping 39%
- Subscription services 37%
- Technology products 36%
- Buying lunch everyday 35%
- Household essentials 32%
- Coffee 32%
- Food delivery 32%
- Gym memberships 30%
- Entertainment (movies, concerts, etc.) 29%
Budget? Isn’t there a different word?
Trusting your brain with all the figures is not a good idea. We get distracted; we cheat and lie to ourselves. Then we hear the forbidden word “Budget”. Whether you make $30,000/year to $1,000,000/year everyone needs a budget, no one is excluded, not even a homeless person. To make this more fun I’m not going to use the word ‘budget’, it sounds super boring. Instead, I’m going to use “harmony”…that’s sounds kind of corny but when there is harmony in our finances, everything works together. And gosh, when we get jammin’, financial freedom will be a #1 hit for years! Isn’t that what we’re all aiming for? On a side note, no pun intended, when you go off-key you’ll TRY to believe the harmony still sounds nice, but in reality it stink-ith. Stop lying to yourself. Developing a routine saves us a lot of hard-earned cash.
How do we fine-tune our money?
First and foremost, I want to make this clear, a ‘harmonic wallet’ (B-word) isn’t created to punish us and hold us captive; it’s here to simplify life and set us free.
Money management has a few different layers. One layer is keeping a record of every single expense. This may sound tedious, but it’s the most important step to understand where the cash flow holes are and where the money mountains prevail. However, keeping track is where most people fall. WARNING! People will manage money for a few days then stop. Just like a diet. Listen up friend, you’re not a quitter. If you want this bad enough, you’ll make it happen. I believe in you. Keep up the good work, it will literally pay-off. This is the difference between living debt-free and frugal living. There is nothing wrong with frugal living, but when you depend on it to live every day it can be an exhausting life.
Which leads me to the know-hows. Over the years my husband and I have used a few techniques that have helped us manage our money. Most importantly money management helps us understand what’s going on. Our money management techniques kind of mimics our camping life. We started with a tent, then we moved to a small camper, yet got a little larger trailer, and now we have a 5th Wheel. We’ve learned something in every phase until we found our jam. In which our jam got us a 5th Wheel! Below are the four tools we’ve benefited from over the years.
Tracking Tool #1: Old School
Good old pencil & paper. There are LOADS of downloadable printables online; finding one that fits your needs is the hard part. It’s overwhelming. My rule of thumb: Keep It Simple. Think of your finances like a business, in fact, treat it like a business. All businesses start out with pen and paper. Grab the old college-ruled notebook and a No. 2 pencil to get started. You can also get a Budget Planner which brings a little ‘pretty’.
5 Steps with Old School
Step 1: Dust off the old notebook; rip-out your old psychology notes, sharpen your pencil and jot down all the categories that take your money. For instance: groceries, autogas, utilities, insurance, phone, memberships or subscriptions. This is the first step. Just list the categories in one column.
Step 2: Start saving receipts and keeping track of what is EFT (Electronic Funds Transfer every month). Even if you’re putting these things on a credit card, keep the receipt. Remember this is a gradual approach to finding harmony.
Step 3: Pick a regular time once a week to go through the receipts and bills that were collected. Maybe Sunday afternoon or Thursday night. Write alongside the category of how much you spent that week. Keep the list going for the whole month.
Below is an example of what your paper might look like…this is for one month. Note the tallies for coffee.
Step 4: Don’t forget your income! You can put your income on the top or bottom of your sheet. List all your paychecks for the month.
Step 5: It’s math time! Add up all the amounts from each category (row) and write in the total for that specific category. Then the scary part happens; add all the expenses together (column), then subtract that from your income.
PRO: Anyone can do it. All you need is a calculator.
CON: This method takes a bit of time. Generating a report would take forever and require a lot of math.
Here is a nice budgeting book if you’d like to go this route. Click the picture to check out more details.
Tracking Tool #2: graduate to desktop
The Small Camper
After we mastered the pencil & paper method, my husband and I decided to move up to a computer accounting program. I’m not talking Google Docs, which is a really great way to keep track; many of my friends use Excel these days. Do what fits your lifestyle. If you like Excel I have a free spreadsheet download below!
PRO: If you want to print a report or reconcile your account, an accounting program makes it so much easier…especially for taxes. Essentially it’s a glorified check register with the ability to print reports. Another feature I really like is that you can have multiple accounts. For instance, we have our personal checking, savings, health savings, and our son’s account all in one program. And they are from all different banks! We use Quicken Starter. It’s a simple way to start. Unfortunately, you do have to pay for it, but they have a 30-day free trial.
In our household, I’m the one who updates “the books”. I pay the bills, I keep the receipts, I reconcile the account. My husband analyzes the reports and strategizes. We have our roles figured out…SUPER IMPORTANT! With Quicken Starter I have enjoyed the program; it’s easy and clear.
CON: It doesn’t automatically update your account in real-time. So if you go to Taco Bob’s for lunch, Quicken doesn’t know that right away. Plus you have to pay for it but it’s not that much for what it does.
Click on the picture for more details.
Tracking Tool #3: now to an app
The Little Bit Bigger Camper
We then experimented with Mint. It’s an online-only app for managing your money. Mint is FREE! But it’s a bit more complicated. You can see all your transitions, but in order to itemize them, you need to wait until they clear. It’s great for budgeting, tracking, and bill reminders, but it doesn’t have the reconciliation feature and reports can be a bit tricky. Again, do what fits your lifestyle, but please keep it simple. Other Apps to checkout are YNAB (You Need A Budget), nerdwallet, and mvelopes.
PRO: It’s free and on your phone.
CON: It’s free and on your phone. No reconciliation option or easy access to reports.
Tracking Tool #4: The best of both
The 5th Wheel
We’ve now moved up to Quickbooks Online. If you’re looking for the best of both worlds, do it the simple way with this program. It’s an online check register, with reports, and account reconciliation. My husband and I have been using it and are loving it! I can’t believe how much fun he has with this program. The downside of this program is that you have to pay for it. But, don’t look at that as an expense because the program and its capabilities can actually save you a lot of money. Worth it.
Click on the picture for more details.
PRO: You got it all here. You can access from phone or computer. Reconciles on its own. Captures expenses. Has budgeting tools…oops…I meant ‘harmony’ tools. And it’s easy to use. Many businesses use this program.
CON: You have to pay for it. You can only use accounts from one bank. It can be kind of confusing.
To create harmony is to understand where your money is going and how you will process that information. What needs to change? And how are you going to do that?
David Bach says, “The solution to your money problems isn’t more money; it’s new habits.”
Make harmony with your money by looking at your habits and experimenting with new ways on how to change them without losing your lifestyle.
Here’s a free Excel cash flow worksheet to help you get started. Simply click on the link and it will download automatically. Then in the lower-left corner, click the up arrow and click ‘Open’. You can then save it on your computer and start plugging away! Har-Money Worksheet.
By Christy Copyright © 2021 Simplify Firefly. All Rights Reserved.