For the last 25+ years, I have tracked every dollar we spend (and every dollar we earn) in Quicken.
Oh, and I enter every transaction manually.
Doing this is so second nature that I don’t think I’ve ever written in depth about it here, even though it’s my most long-standing, and probably most important, financial habit.
Tracking every dollar in and out, even manually, doesn’t take as much time as you’d think. A lot of transactions are repeat transactions (same grocery store, same mortgage payment, same utilities) and once I start typing, the rest of the transaction details auto populate so I just have to hit enter.
But, still, tracking every dollar does take some time, so why do I do it?
First, it’s how I keep and organize our financial records.
Everyone needs some kind of system, and this is mine. And the effort it takes pays off a million times over. Once entered, these numbers provide answers to any number of questions, from the most basic:
• What did that vacation cost us?
• We’re going to a graduation party/wedding/First Communion. How much did we give her sister for the same event two years ago?
• When is the last time we had our air conditioner serviced?
To the most crucial (especially at tax time):
• What estimated tax payments did we make?
• How much were our charitable donations?
• What did we pay in property taxes?
All of these questions can be answered in seconds with a simple search of an account register or by generating a report and I’m addicted to having that info at my fingertips.
Second, entering transactions, which I do once a week or so, creates an awareness of where our money is going in almost real time.
I throw receipts on my desk and enter them from time to time, then shred any receipts I don’t need to keep when I’m done. When I’m reconciling our bank or credit card statements, I pick up any transactions that I’ve missed.
Speaking of which, reconciling statements is a breeze. It literally takes a couple of minutes and everything feels so nice and complete when I’m done.
And while I’m entering and reconciling, I’m taking note of where we are spending our money.
Of course, you don’t have to do all of this manually. Quicken, and any other program worth its price lets you download your transactions directly from your banks, credit card companies, and other financial institutions and that can be a big timesaver.
So why don’t I do that?
Mostly because I’ve been using Quicken so long that downloading wasn’t an option then. I honestly think I was using it before the internet was even in widespread use (I’m old!) so manual is just what I’m used to.
I also feel like I have more control, and will catch any bank errors more easily if I’m entering manually. I don’t know that that is true, and – good news! – I never find mistakes. But still, I feel more in control.
Entering transactions manually means they are cleaner, meaning prettier, than when they come down from the bank with all the extra numbers, random capitalizations, etc. That’s probably not important to most people but, it seems to matter to me. :)
Perhaps most importantly, I’m not sure that reviewing downloaded transactions would give me the same awareness of our spending that manually entering does.
Finally, I track every dollar in and out because having all this info organized in one place tells me a story about our money.
Once information is entered, it can be used to generate reports, and reports give me the answers to big-picture questions like:
• Did we spend more or less overall this year than last?
• Which categories are up and which are down? And why?
• What did we spend eating out last month?
Just having this knowledge is enough to cause some reflection and possibly even improvement in your finances. Financial Planner Lauren Lyon Coles puts it this way:
I agree that simply paying attention can cause you to make some better decisions with your money.
However, I don’t think that tracking alone is usually enough to make big changes in your finances. At least it wasn’t for us. But tracking provided some inspiration for us to do the big things and also gave us the information we needed to create a plan to do those things and to see track our progress.
So why tracking isn’t everything, it all starts with tracking. And we’re still using it to evaluate and set new goals.
Thoughts? Do you track your spending? What do you use? And if you’re interested in more details about how I use Quicken (categories, specific reports, etc.), let me know.
P.S. As I’ve said, I use Quicken to track our income and expenses. (Note: That link is my Amazon affiliate link, which means if you click on it and decide to try Quicken, I will earn a small commission at no cost to you.) I buy the most basic version of Quicken because how I use it doesn’t require lots of bells and whistles. I’ve tried other financial programs and software, but none have been as good a fit for me as Quicken. Others I have heard good things about include Mint, YNAB (You Need a Budget) and Personal Capital.