What if there was a company that, despite making money, was always short on cash? And when you asked where all the money went, they said, “I don’t know!” When you asked to see financial statements showing the company’s spend, they said, “It doesn’t exist!”
A clueless company that’s perpetually short on cash does not actually exist in the corporate sphere. And if it did, well… it probably wouldn’t exist for very long. In reality, companies work day in and day out building out financial models of their spend. They know exactly how their money was spent yesterday, how they’re spending it today, and how they plan to spend it tomorrow.
No One Actually Tracks Their Finances, But They Should
Most people have absolutely no idea where all their money goes. Most surveys show 60-80% of Americans living paycheck to paycheck. This number doesn’t really go down even as salaries go up. For example, over half of Americans making over $100k still live paycheck to paycheck (also called, “lifestyle creep”).
Simply put, people just aren’t tracking how they spend their money, even when they make a good amount of it. People see their salaries come in biweekly but are blissfully unaware of how their money gets allocated.
However, there are clear benefits to knowing where money has been spent in the past to achieve certain goals in the future. It doesn’t make sense that this is true for companies, but not people.
Easy Ways to Start Tracking
The good news is, there’s no need to hire a personal accounting team. All you need to do is to start the mundane task of tracking your finances, before moving onto something more exciting.
To get started, there are a few overarching ways to track your expenses. (The “eyeballing it” method does not count.)
1) Your Credit Card Company Did It Already
Many credit card companies already offer a way to see a breakdown of spending on your card. Some companies, such as Chase, even offer budget capabilities, which is a good way to lower expenses if you’re feeling sad about your savings levels.
Pros:
- Zero work, besides figuring out how to navigate to the feature
- Free (you’re technically paying them swipe fees already)
Cons:
- Not all credit card companies have this, or they do and it’s not very good
- Hard to get the full picture if you use multiple different credit card companies
2) Use An App
Of course, there’s plenty of apps (and websites) that are made specifically to track your expenses (like Copilot, Monarch Money, and YNAB). These companies link information from all your spending accounts through a 3rd party consolidator, such as Plaid, after you provide your logins. Tracking apps make it easy to see everything in one place, provide pretty graphics and charts, and come with a variety of additional features like budgeting and net worth tracking.
Pros:
- User interfaces are attractive and easy to use
- Auto-generated charts make it easy to track progress over time
- Still relatively hands off as the app does a lot of the work for you
Cons:
- Some apps are free, but most are freemium or paid after free trials; plus the free apps are very likely selling your data
- Lots of users report issues connecting their financial accounts to the apps, or the account may not link at all if it’s a smaller financial institution (ex: local credit unions)
3) Go Hardcore and DIY
The preferred method if you want max control is to create your own spreadsheet via Google Sheets or Excel. Want to track all your credit cards, including the one really obscure card issuer that apps never work with? Done. Want to create multiple custom views of your net worth? No problem. After all, if it’s good enough for Fortune 500 companies, it’s good enough for you.
Pros:
- Full customization on spending categories and charts
- Go granular or simple, with the ability to add more functionalities later
- Access financial account without privacy or security concerns
- Free (!) because no one likes paying an expense to track their expenses
Cons:
- Tediously self upload and self categorize transactions
- Must learn how to use spreadsheet formulas and charts (depends on your starting level of familiarity)
- Yes, it’s free… but you pay with your time
Track, Then Manage
Personal finance, like corporate finance, begins with a fundamental practice: tracking expenses. Whether through fancy apps or spreadsheets, the act of tracking expenses allows us to identify areas for improvement, set realistic budgets, and work towards financial goals with purpose.
But let’s not forget the bigger picture. Tracking expenses isn’t just about restraint; it’s about empowerment. It’s about understanding your spending patterns, spotting trends, and making intentional choices with your money. So, let your tracking journey be a guiding light towards a brighter financial horizon. Your wallet – and your future self – will thank you for it.