Keeping Track of Your FinancesPaying close attention to your spending helps keep track of what’s going out of your account versus what is coming in. Knowing how you spend your money can also give you clues on how to properly budget for monthly expenses, so you aren’t (un)pleasantly surprised by the balance on your monthly bank statement at the end of the month.
Ideally, you should strive to monitor your account activity throughout the month on a regular basis. This keeps you informed and helps guide you on where you can cut back to avoid overspending. Creating a budget is a great way to check whether your spending is in line with your goals. Not sure where to get started? Here are some tips.
How to create a budget
Creating a budget is your first step to healthier finances. So long as you account for specific things, there’s no right or wrong way to document your budget.
1. Document income & recurring expenses
To get started, you’ll need to figure out two different totals:
- Total recurring living expenses (housing, utilities, food)
- Monthly household income
Once you have those numbers, you can move to automating your recurring expenses. This allows you to schedule and plan for your nonnegotiable expenses. Be sure to factor in when you’re paid each month so you can schedule your automatic payments after your paydays.
2. Start saving & set goals
Some experts suggest saving up to 15% of your income, but saving any amount each month still helps. If you have goals of buying a house, planning for retirement, tuition or want to set up an emergency savings fund, every dollar deposited into your savings counts. Budgeting to save even 1% of your income each month adds up over time and is a great way to pay yourself first.
3. Create a debt-reduction plan
If you have any kind of debt like loans, credit cards, etc., it’s good practice to prioritize the debt you have and to include them (when possible) within your budget. Too much debt can lead to a lower credit score or cause problems with securing loan financing in the future, so doing what you can each month to reduce or eliminate your debt is an excellent financial habit to pick up.
4. Develop a spending plan
After you’ve recorded your income, recurring monthly expenses and have worked savings/debt reduction into the budget, now you’ll create a spending plan. A spending plan relates to your lifestyle expenses and should be in line with your remaining finances so that you aren’t overspending. Your plan will give you an idea of how much spending money you comfortably have a month so that you know what you can afford and what you might need to cut back on.
Tracking your spending over a period of time also gives you an idea of your money habits, which helps lead to better financial choices.
An important reminder about budgets
Remember to treat your budget as a living document that is meant to change over time, according to your needs and circumstances.
Plus, don’t be afraid to discuss finances with your partner. Couples can benefit when they both track their spending as it makes it easier to stick to a budget. Sharing financial details from separate or a joint account is a healthy step to take. Children can also benefit from learning money management tips so they get comfortable with talking about finances early on.
Benefits of tracking finances online
One of the most common ways to monitor your spending is through your financial institution’s online and mobile banking services. Online banking gives you easy access to a number of account details, including:
- Account balances
- Pending and posted transactions
- Images of cleared checks
- Monthly electronic statements
- Upcoming scheduled bill payments
Like your budget, online banking only works for you if you’re using it. It’s wise to log in to online banking at least several times a week, if not daily. Monitoring your account balance can help you proactively manage your budget. As you regularly check your balance, compare the numbers to your monthly spending records to catch any possible discrepancies between the two. Also, take advantage of any tools your online banking offers you, like account alerts to notify you if your balance goes below a certain level, or the option to be able to view your balance quickly without logging in to your account.
We’re here to help you maintain that big picture view of your finances. Call or stop by your local Dollar Bank office today for advice on spending plans, budgeting, debt-reduction and more!
This article is for general information purposes only and is not intended to provide legal, tax, accounting or financial advice. Any reliance on the information herein is solely and exclusively at your own risk and you are urged to do your own independent research. To the extent information herein references an outside resource or Internet site, Dollar Bank is not responsible for information, products or services obtained from outside sources and Dollar Bank will not be liable for any damages that may result from your access to outside resources. As always, please consult your own counsel, accountant, or other advisor regarding your specific situation.
Posted: May 11, 2021