Part of our personal finance plan for this year and beyond involves tracking where our money is going.
I’m tracking expenses with Quicken and so far I’m keeping up. Automating the download of transactions and not trying to track every last transaction to every single account is helping.
Tracking manually: Old-school, or just old?
Recently a few other personal finance bloggers weighed in with a response to the following question from Money Saving Enthusiast:
Why are people quick to tell people online tools are better than manually budgeting if manual budgeting works for some people?
This is a great question. Manual expense tracking — that is, pen and paper, or at most a simple spreadsheet — certainly can work. It’s worked for centuries.
As I was going through a Crown study, part of the exercise was to track expenses. Because the study was meant for a broad audience, the tracking didn’t rely on any particular commercial tool. The primary method for tracking was pen and paper. Our facilitators sent us a spreadsheet template for tracking our expenses.
It was guaranteed that we could use one of these methods. We could download Open Office to view the spreadsheet. And if we didn’t have a computer (!) we could get a notebook out and add the numbers up with a calculator (or by hand if we really wanted to dust off the mental cobwebs).
A less complimentary way or describing these methods: They’re the lowest common denominator. This suggests that online tools or automated tools are better.
Some prefer the manual method; others like automatic expense tracking
Miranda Marquit of Planting Money Seeds uses the manual method. She says: “I’m all about the manual. I use personal finance software that looks a lot like a ledger, but I don’t link it up to my accounts. I enter it all in myself.” Andrea Travillian of Take A Smart Step recommends this to her clients: “I always tell people to do it their first 6 months with pen and paper – the only real way to know your numbers. Then move on to the tool for you!” J. Money is old-school, too: “I still track my money via old school excel spreadsheet, but whatever works!”
Eric Rosenberg of Narrow Bridge, however, prefers more automation: “I think the online tools (or desktop, but I use online) because they take care of the heavy lifting for you. Pen and paper take too much time and can’t be accessed on the go.”
Todd Tresidder of Financial Mentor is pragmatic: “Judge by results, often harsh but always fair. Whatever works is what matters.”
Is there a best way to keep track of expenses? It depends
I think this is where I fall right now. I have tried to do things manually, and I’ve missed the mark. Call it squirrels in the head, or lack of follow-through, but the one-click update from Quicken for most of my accounts is really nice. And I know that I’m not going to fat-finger an amount if it’s downloaded. I still make sure the expense categories are accurate, and this involves splitting a transaction into its components. But those are only a fraction of the transactions we do, so it’s manageable. I’m trying to keep things simple enough to stick with the process, but not so simple that I miss the ability to analyze where our money is going.
That’s me, but it’s obviously not everyone.
I know that there is benefit to tracking expenses. Track them in whatever way that works for you. If it’s not working for you, try something different until it does.