How do you manage your finances? In my journey to better manage my finances, I have followed a path that took me from virtually no management at all to detailed management.
I started out by trying to keep a running balance in my head and ensuring that I had a cash buffer in my checking account in case I forgot that I had spent some extra money. That did not work well. I had cash being deposited into my savings account each paycheck, but it immediately moved to my checking account and out of my ownership (I spent it!)
So that was not working, so I migrated to a printed out register. I tracked every single expenditure on this register. This vastly improved my understanding of where our money was going, but it really did not improve our financial situation at all. It just allowed me to understand where the money went. It also helped me out a lot with addition and subtraction skills as I had to write in at least 50 transactions a month and perform the math each time. Yikes! I cannot believe I used the debit card for $1.97 at Home Depot on 11/14/2002 or $5.44 at Wal-Mart on 11/8/2001 or $2.31 at Wal-Mart on 2/27/2000 or $6.04 at Wal-Mart on 11/12/1999.
Well, the printed register and manual bookkeeping really helped me to better understand WHERE our money was going, but it certainly was not helping us keep some of our money. So we migrated to Microsoft Money. Oh baby! This software is sweet! It allows you to understand where all of your money is going. It has custom reports that you can generate to better understand opportunities you have for saving money. Guess what? It did not help us save money. It is the best method we have utilized for management of our finances, but it did not help us save money.
Do you know what helped us save money? Applying the information we were learning about our spending habits. Making changes to our spending habits is what helped us save money. We applied the simple formula of
INCOME – OUTGO = ZERO
OUTGO included Savings. It included saving for known upcoming expenses like life insurance, auto insurance, vacations, and clothing.
If you are looking for a good money management tool, I highly recommend you try Microsoft Money! It will NOT allow you to save money, however. You must apply the information the software provides you in order to save money.