Tips for Tracking Expenses Online

The past few weeks I’ve been giving personal finance presentations to a few companies and social groups. Each presentation starts off the same. It starts off with the importance of tracking expenses in the pursuit of building a budget. Having a strong grasp on your family’s cash flow is the foundation to making good financial decisions in the future.

As I’ve shared in past posts, I am a huge advocate of cash flow management and personally hold myself accountable to budgets using online tracking tools. I bring up tracking expenses and recommend online tracking tools all the time in conversations. Some people take the recommendation and run with it but on occasion I hear an excuse on why they aren’t using an online tracking tool or the reason behind why they stopped tracking. The responses usually goes something like this “It was a cool tool to use but…”

  • It takes a lot of work. When I log-in I have too many line items to categorize.
  • The categories don’t stick and it’s frustrating.
  • It’s annoying, I get too many notifications on my phone.

I think you get the idea.

When I hear these comments, it usually points to user error. It tells me that there is room for improvement on how people approach and use their online tracking tool of choice. Sharing below some tips I’ve found helpful over the past five years of tracking my expenses through Mint.com. While my experience is Mint.com specific, I’ve learned through research and talking with others that use other online tracking tools that these tips would apply across different platforms.

Budget Categories

Logging into any online tracking tool for the first time can be overwhelming making it hard to know where to start in order to get the most out of the program. While the top priority is to sync up your credit cards and bank accounts to track inflows and outflows, the next step is to create budget categories. Speaking from my experience in using Mint.com, I found they do a good job of suggesting categories that might be part of your budget and provide a pretty extensive list of other spending categories that they’ve collected from other users.

While it may seem overwhelming, don’t get discouraged. A great place to start when creating budget categories is by looking at your last credit card and bank statements to make a list of the various spending categories from that month and set those up on your budget tracking tool. To help you in this process, I created a list of the categories I’ve personally set-up in my Mint.com budget tracker as a guide.

As for the amount to spend in each category, now is not the time to stress about the exact figure. For this first pass, put in a dollar amount that makes sense given your net income and spending behaviors. The plan is to come a back to these numbers and revise them. More on that later.

Consistency

The next key to success for using an online tracking tool is to be consistent in logging on and assigning transactions to the categories you just created. As I hinted at earlier, it takes time for your program of choice to recognize your spending habits. For example, one of our favorite restaurants (Happy Camper) kept getting categorized as “Travel”. After a few times of changing the Happy Camper transactions from “Travel” to “Dining Out” the program remembered the categorization moving forward. The key is not to give up and to be consistent with how you code expenses and how often you log-in to categorize your transactions.

In terms of cadence, my recommendation is logging on every 1-2 weeks to check how transactions are being categorized and tracking progress in each budgeted category. Any longer than 2 weeks and you might find yourself overwhelmed with transactions to sort through. This isn’t meant to be a chore and doesn’t have to be if you take it in manageable chunks.

Phone App + Notifications

I’d also recommend downloading your online tracking tool of choice onto your phone and turning on notifications. Having your transactions at your fingertips may encourage you to review transactions on a more timely basis. As an example, if you take public transportation to work this would be more productive way to use your commuting time that scrolling mindlessly through Twitter, Facebook and Instagram feeds…

In addition to downloading the app, be sure to also turn on email or text notifications. I personally like the email notifications over the text notifications. These online tracking tools will send you alerts as you approach or exceed each category budget. The whole point of tracking expenses is to gain awareness of your spending habits. Getting a message after leaving your favorite store letting you know you exceeded your clothing budget will definitely get your attention.

Shopping Habits

Speaking of shopping, one thing to be aware of is the ability to split transactions into various categories. For those of you who like to shop at places like Target, Amazon, Costco or Walgreen’s where it can be a mixed bag of groceries, clothing, wellness and household items, be sure to use the split expense tool. It takes a bit longer to determine how much spending went towards groceries vs. clothing or things you didn’t really need… but its meaningful to divide these expenses between the correct categories. Good information in equals good information out. Put in bad information you’ll end up with bad information.

On a personal note, knowing that I have to divide a shopping trip between household items vs. groceries vs. clothing has helped me stay on track when I walk into a Target or Walgreen’s. Going into the trip, I know that if it becomes a multi-category trip that I’ll have to invest sometime on the back end to separate out expenses. That alone is *usually* enough motivation for me to walk past the women’s clothing, shoe and athletic wear sections. Seriously how savage is Target that those are the first sections you pass in their stores!?! They know their audience too well.

Payment Types

In this post, I talked about different methods of tracking spending. I will say that online tracking tools work best if your primary way of transacting is using credit and/or debit cards. If you are a big cash user, using an online tracking tool will be more of a manual process. It will capture the ATM withdrawals through the transactions tab but it will be up to you to split those expenses to capture what those funds were used for. Not to say you can never use cash, but consider committing to using either a credit or debit card for all expenses to get the most out the online tracking tool.

Evolving Process

Circling back to the first tip to success, setting categories, to address assigning a dollar amount to each budgeted category. My recommendation has always been to ease into the budget. By that I mean, use the first month of tracking your expenses to set a baseline budget by spending as your normally would in a given month. After the first month wraps up, then the real budgeting process begins by looking back at what was spent in each category and make note of what surprised or shocked you. Building awareness around your spending habits is the true first step in budgeting.

Only after you have a baseline on your expenses can you begin to move forward and make changes in each spending category so that it aligns with your budget targets. Remember the 50/30/20 Rule? This is an example of a budget target that I encourage people to mirror in their monthly spending. With the 50/30/20 framework there is space in their budget to save for an emergency or future financial goals. Depending on where someone is in life or their specific financial aspirations, their budget target might look more like 40/30/30 or 60/30/10. There is no wrong answer as long as it aligns with your financial goals.

Cash flow management is the first step to building wealth and accomplishing your financial goals. Are you ready to take that first step and start tracking your expenses or consider giving it another shot?

If you’re interested in attending one of my upcoming personal finance presentations, I have one happening this Thursday, April 23, 2020 at 12pm CST. You can use the link below to reserve your spot!

Register here: https://lnkd.in/evUTcg6

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