Power of Advice
Tracking your money
While it’s important to know how you spend your cash, Bruce Sellery doesn’t think you need to know where every penny is going.
I want to get a program to track my spending. By sorting my credit card transactions into categories I have a general idea of where my money is going, but my process is not smooth and takes too much time. Do you know of a good software solution that will work with comma separated values (CSV) files?
I am not a spending tracker. Don’t get me wrong: I am obsessive compulsive in a number of areas, including the way I manage my calendar and keep my inbox ultra clean. But tracking spending down to the penny? Nah. I’d far rather feed my need for order by tidying up the Tupperware drawer.
I know that your question was not about my habits, but about your own. And you want to know how to make them less onerous. My first tip, though, is to ask yourself why you’re tracking spending in the first place.
Why track spending
As you say, tracking spending can take a lot of time. Even with a simpler, better process it is still going to take time, so I want you to figure out why you’re doing it. Is it because you are obsessive compulsive and this is a way for you to feel like you have some control in the world? Is it because you have a spending or debt problem that you want to get under control? Do you track your spending because you’ve heard that is a solid personal finance habit? Or is it because you simply like the data it provides (it’s a hobby for you)?
What I see time and time again is people wasting valuable time tracking their spending and then not using the results. The number one reason to track your money is so that you can see what you spent in the past, which, in turn, will help you change your spending habits in the future. The analysis of the data and the subsequent commitment to behavioral change is what really matters, not the data itself. For that reason, I recommend you do the minimum amount of work to get an answer that is sufficient to alter your behavior.
Once you are clear on why you want to track spending, you basically have three options on how to do it: Spending aggregators, apps and credit card spending reports. Unfortunately, none of the options are perfect.
Mint.com: Aggregate your data
The most common platform for aggregating your spending data is Mint.com. You provide it with the passwords to your credit card, bank and investment accounts and it pulls the data together in one place. But a word of caution: by allowing Mint.com to access your account you may breach the terms of service agreement you signed with your bank. (For a more detailed discussion on Mint.com see: Should you close your mint account or Are you really protecting your password?
Anecdotally, I’ve heard from people who like Mint.com and some who don’t, but no one who absolutely loves it. The categorization isn’t perfect so while it brings the data in automatically it still takes time to categorize it correctly. You can download CSV files on Mint.com, but the output might not be what you want because it is limited to transactions versus reports.
Mint.com seems to have the best interface, but Quicken is another prominent and well-established name. (Both Mint.com and Quicken are owned by Intuit). There are other newer services that are technically available in Canada, including Yodlee and Moneystrands, but they may not have access to the financial institutions you use, so it is best to verify that point first.
The big challenge is that it is very hard to dabble with any of them because you need to give the system access to your personal data for it to be of any use. And I’m not convinced that it is worth it.
Smart apps: Spending and your smart phone
There are 12,562 finance apps available for download to your smartphone on iTunes alone. Sure, the best of these apps are easy to navigate, help you create funky charts and allow you to export in CSV. But for the most part you would need to key in your transactions manually. You are probably more disciplined than I am; I would stay committed to doing this for about 9 seconds.
Credit cards: Keep it simple
The third option is to keep doing what you’re doing, but better. Since you are already using your credit card to track spending, why not try to optimize that process? The functionality differs among the card providers, but most of them allow you to set up personal categories, produce a spending report and set up alerts if you are nearing your budget limit in a certain area.
As with Mint.com, you will have to manually correct a lot of categorization errors (For example, my credit card thinks my office supplies from Staples are groceries) and any purchase I make in the U.S. falls under foreign currency transaction. The drill-down features can be quite poor, so you have to do a lot of clicking to see what is behind the totals.
On balance however, unless tracking is a hobby for you, I’d lean towards making do with what exists because I don’t think the perfect solution has been invented yet.
What do you think?
This is definitely a question that can benefit from the wisdom of crowds. Please add your comment below on what you’ve tried and liked, or tried and disliked.
Note: Click hear to read a similar post on investment portfolio trackers.