I’ve referred to building a retirement plan in several previous posts, and I will show you how I did it in future posts. But before we get to that I need to talk to you about an endemic problem afflicting most Americans…. the problem associated with tracking money. No, I am not talking about the need to track money that finances terrorism or organized crime. I am talking about the need to track your money.
In April 2014 Business Insider reported that 61% of US adults do not track their money. That was only six years after the financial meltdown of 2008! That is pretty damning, but not surprising … at least not to me. As someone who has tracked their money religiously for the past 18 years, I can attest it takes time and discipline. It is often undervalued and much maligned as a “man” activity in my family (just ask Mrs. Grumpus). However, long before I taught myself anything about the investing world, Financial Independence (FI), or early retirement options I used to lock myself away with piles of receipts in my man cave every two or three months– just so I would know how our money was being spent.
This habit turned me into a relatively good saver, even if I did not know what I was saving for. It was also the mechanism by which I broke Mrs. Grumpus of her profligate pre-marriage spending ways, which in turn made us a family of savers. Don’t tell her I said that. It’s true but I do not want to antagonize her too much or she will shut my blogging down. Now that I think of it… this may be the reason why she has eternally decreed family finances as a Grumpus Maximus function. Damn …
All joking aside, it would have been impossible for me to contemplate subjects like retirement or FI without knowing how much we currently spend and save. When it came time to build my retirement plan, my previous 18 years of work paid off too. I was easily able to bring up average spending in most of life’s major categories and use those numbers in my retirement calculations. That level of detail allowed me to narrow down my level of uncertainty as I planned for my family’s future. It gave me a greater amount of confidence in my calculations.
Sound like too much work? That is OK because you don’t need 18 years’ worth of data before building a financial or retirement plan. Ideally, I would recommend that you track your expenses for a year before conducting long-term financial planning, but you could easily get away with just one quarter and some smart extrapolating. In other words, just three months. That sounds much easier doesn’t it?
Still not convinced? Well let me ask a few questions:
- How can you estimate total retirement living expenses if you are not tracking your current spending for life’s major categories?
- How can you determine savings and investment goals to achieve FI if you do not know how much money comes in and goes out over a year?
- How do you identify and pay down debt?
- How do you calculate your savings rate?
It’s difficult if not impossible to do any of these things, and a myriad more, without tracking your money.
Demoralized yet? Don’t be, because the good news is that there are now plenty of good-to-great tools out there to help you track your money, many of which are free or close to free. There is no longer a need to lock yourself away in your man/woman cave for nights on end like I used to do either. Many of the tools automate a lot of the work for you. Often just finding the right tool to fit your personality and lifestyle is half the battle. I’ve used several software systems over the years and experimented around with a few spreadsheets too. I discuss all of these below. However, nothing is stopping you right now from simply cracking out a pencil and a piece of paper and tracking your money manually. If that suits you best, do it. My point is not to sell you on any one piece of technology or computer program, but to compel you to start tracking your money now.
With that said, the below bullet points represent the extent of my personal history and knowledge on the current money tracking options available to you:
Goodbye MMoney, I miss you so …
I started using Microsoft Money (MMoney) in late 1999 when it came loaded on a computer I bought. Until then I tracked my accounts by hand so I immediately fell in love with this software platform because it saved me so much time. The ease with which you could import your bank, credit card, and brokerage data; manipulate it; and display it was without rival. Unfortunately, by the late 2000s Microsoft stopped supporting the active import functions, and then “sun downed” MMoney completely. Possibly due to the cult-like following that had built up amongst it die hard users, Microsoft decided to offer the software for free online. It remains available today. None of the automated features work, but you can still manually import data (in Quicken formats no less) from your bank and brokerage; manipulate it, and display it just like the days of old. If I was a computer programmer, I would have ripped the code apart, figured out how to re-engineer the automated functions, and make them work again. Alas, I am not, so I eventually had to transition to software whose automated features worked in order to save some of my precious time. This led me to Quicken …
Quicken (**Please note I am an amazon affiliate**).
Quicken is powerful, and has a great report generation ability, but an obtuse interface
I transitioned to Quicken 2016 at the end of 2015 because I missed the automated features on MMoney, and Quicken allowed me to transfer my entire MMoney history into Quicken format (with a lot of work). Quicken is by far the most powerful tracking, budgeting, and visual display tool out there today. It allows you to store all your data locally if you like, keeping it safe on your own system. Once I got the hang of its reporting system, I learned to break out my spending, saving, and investment performance; and visually display it. It had several great features, but none of them I considered indispensable. While a good tool, I never fell in love like I did with MMoney. The ultimate deal killer for me was the Quicken interface, which is obtuse at the best of times. Whereas MMoney was forgiving if you made a mistake (like accidentally deleting a transaction), Quicken is not. Along with the price tag for the high powered version, it ultimately just proved too problematic for me to stick with it long term. I still track my investments using Quicken 2016 due to the power of its historical recall and display capability, but that is mostly as a backup method to my new primary program — Mint.com.
Mint’s reports are OK, but its mobile interface is what makes it a winner. Even Mrs. Grumpus can use it!
I switched to Mint.com at the beginning of 2017. Mint continually earns high ratings among many of the software web sites and PC magazines for usability, which made it a big draw for me. Having used it for several months now I can attest the praise is well earned. Funnily enough, Mint is run by Intuit which used to own Quicken. The primary difference between Mint and Quicken is that Mint is a completely online-based platform. My major concerns regarding account safety (since all your data is kept online) has so far proven unfounded. Its mobile app is pretty good too which is a huge time saver since you can label transactions on the go. Unfortunately Mint is not as powerful of a reporting or visual display tool as either Quicken or MMoney, but the amount of time I save using it compared with Quicken or MMoney will keep me using it for the foreseeable future.
Banks.
Many banks these days offer online money tracking software as part of your membership. It is typically found after you log into your account. Several of my banks allow me to add accounts from other banks and credit cards. During my transition period to Mint, I experimented with using USAA’s online feature. Since I keep my investments with their online brokerage, it seemed like an easy win. I added all my other bank accounts and credit cards to their online software and started to update transactions. It was all fairly straightforward. However, its lack of an in-depth display or visualization tool made me give up. Being able to view my cash flow across all accounts for a month, a quarter or a year is important to me. If it is not a big deal for you, then maybe simply using your bank’s software is the way to go.
Other Software Programs.
There are other platforms out there on the interwebs that you can use to track your money. While I have not used them, do not let my lack of experimentation stop you from exploring to find your perfect fit. One platform you might want to consider is Personal Capital. The Mad Fientist, a blogger who I have mentioned previously and have a lot of respect for, is apparently a big fan, and his article/advertisement makes a compelling argument if you are someone with a lot of investments. On the other end of the spectrum, if you are simply in need of a money tracking and budgeting tool, you may want to consider YNAB – You Need a Budget. My brother, Grumpus Bretherus, has used YNAB for years and this is what he had to say about it.
Spreadsheets.
Finally, there are dozens of spreadsheets online with built-in calculations able to assist you in tracking your money. One spreadsheet I highly recommend is located at the Optimal Living Daily podcast site. Justin Malik, the creator of the podcast, created a spreadsheet to help himself get out of debt. It changed his life so maybe it will change yours. All you do is sign up to his email distribution list. If you are not comfortable doing that, then go to the Optimal Finance Daily portion of his website and type in “spreadsheet”. It will show you three podcast results with links to various FI websites that contain spreadsheets. Mad Fientist also has a spreadsheet that I have experimented with. It not only helps you track your money but will also help you calculate your time remaining to FI.
So that is my pitch on the need to track your money. Congratulations on making it this far in the post. Notice how I did not try to sell you on the need to budget or create a spending plan? “Why” you might ask? Well, I believe that once you start tracking your money routinely, you will naturally start to budget as a result. Maybe not formally; but at least loosely. Once you see the amount of money you spend drinking at the bars on weekends, on coffee in the morning, or on clothing; you will start to question the need. Don’t believe me? Start tracking your money and prove me wrong…