Budget Tracking – Why & How to do It

Resources, Saving / Tuesday, April 21st, 2020

The Need for Budget Tracking

It is often said, if you can’t measure it, you can’t improve it. Translated in budget speak – if you need to manage your spending, you need to track it. 

The FIRE methodology has very few basic principles, but the most pivotal is that your expenses should be less (far less!) than your income. And that is where budget tracking comes in. It essentially requires that you identify your spend, define its limits and then stay within those limits.

So, How Can the Budget be Tracked?

Different people tend to do it in different ways. Some just look at their monthly spend statement in total, some others maintain a spreadsheet which details their spends, while some others use a platform or service to do the heavy lifting. 

Though the first method is the easiest, however it is the least useful. That’s how we started and continued our budget tracking for a while until we realized that we weren’t really getting any constructive feedback other than to know whether we were above or below last month’s spend. However, if this is what you’ve been doing and plan to continue to do, know that doing something is still better than doing nothing, so keep at it.

Maintaining a spreadsheet is cumbersome work but some people like to get their hands dirty, look at the nitty gritty and stay in control of the process.

In addition, there are now quite a few companies that now offer budget tracking products and services, both free and paid. These have helped automate a lot of the manual work and have made the whole process quite simple and streamlined (and much less boring!).

We, however, have designed our own process. We use a mix of platform Moneytree and Google Sheets, and will be delving deeper into our method in this post.

Why we Use a Budget Tracking Platform

  • The foremost reason is to simplify and automate things. Maintaining a spreadsheet by manually recording and categorising each debit/credit is extremely cumbersome. Not many people would be able to maintain that habit and admittedly, we are amongst those people.
  • It does of course help that such a service is available for free. But then, nothing is truly free, is it. Well, not discussing the philosophical viewpoint but just the practical side. If you are worried about your data and privacy, such services also claim to have “bank-grade” security. But don’t take our word for it or for that matter, theirs. Do your own research until you’re thoroughly convinced.There are other measures that we use to safeguard ourselves against a data breach. We have multiple bank accounts and use a dedicated one for expenses only which is the account that we have linked to Moneytree. 

Why is Moneytree our Budget Tracking Platform of Choice

  • Ignoring the fact that they have a supercute-happy elephant as their logo which gallops around on the loading screen, the main reason is that Moneytree offers a  really great free product. Normally other such services such as PocketSmith, offer an automated data feed from banks and credit cards only on a paid plan. Another service, Pocketbook, also seems to be a free service however we are yet to use it. If you have used it, do let us know your experience by commenting below.
  • Other than budget tracking, Moneytree also offers tracking of Credit Card reward points, Woolworths reward points and they’ve also been talking about offering Flybuy points tracking (It’s been “Coming Soon” since forever now!). This may not be that big a factor but for us it showed that they were thinking from all angles. And it does help to have all the reward point tracking in one place.
  • Also, we found it pretty convenient that Moneytree lets us correct/ edit spend amounts and categories. We believe that other platforms provide this service as well, so it doesn’t really tip the scales towards Moneytree, but it’s a functionality that we’ve found pretty useful, so wanted to list it down here. 

Why we Use Google Sheets Along With MoneyTree

  • So, if Moneytree is so great why do we use Google Sheets? Because the end goal for every business is profit. We don’t think Moneytree’s free product will be free for long, great as it is. If it does happen, we may consider to continue as paid customers, but we do want to keep that option open. So as a backup, we record the category-wise, monthly spend data in a google sheet. That also helps us with myriad custom analysis (e.g. 3/6 month average), without any hindrance.

All This Budget Tracking is Great, But Does it Really Help?

Yes, yes & yes! Budget tracking has been a great eye-opener for us. Through the process, we realized how grossly we misjudged our spending habits.

Deliberate, detailed budget tracking has helped us reduce our lunch spend to almost 40% of what it was earlier. We also managed to optimize our mobile phone plans to be more in accordance with our usage patterns, therefore saving on this fixed expense. Also, through routine tracking, we noticed that our monthly medical insurance premiums were pretty high, which led us to  re-evaluate our cover and that helped reduce the out-go. Please consider your personal situation before going ahead with any of our examples.

It will be great to hear more about how you are trying to reign in your expenses and putting that money to work for you rather than the other way round! Do comment below and let us know.

Mr. Fireball

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