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Watching Every Cent

Watching Every Cent

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    If you’ve been working on getting your personal budget balanced, going offline can make some sense. There are plenty of web applications and other tools that really do well at interpreting your spending patterns and other information just by taking a look at your monthly bank statement. But there’s really no substitute for doing some financial tracking on your own.

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    Every Little Cent

    One reason many people seem to struggle with building a budget that actually works for them is a lack of understanding when it comes to telling where their money really is going. Between cash, debit cards, credit cards, automated payments, one-click purchases and all the other myriad ways we can pass our money along to someone else, is it really any surprise that creating a spending plan that works longer than a week is a difficult proposition?

    Building a budget that is truly effective requires a very thorough understanding of your own spending. There is a relatively simple approach to getting the necessary grasp on your typical spending — tracking every cent you spend.

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    It isn’t a long term approach, of course, but if you’re working on getting your finances under control, a good first step is to spend a week or a month simply observing where you’re actually spending your money. It’s a matter of making a note every time you pull out your wallet, whether you’re spending cash or using plastic. At the end of your observation period, you’ll have a list of transactions that will give you a much clearer view of your expenses than a bank statement can. At a bare minimum, you’ll have an idea of where the cash you pull out of the ATM goes.

    Keep It Simple

    For most people, tracking spending for a full month will give you the best picture of finances: how you spend right after your paycheck comes in can be quite different from how you spend during other parts of the month, for instance. However, it is difficult to keep up with tracking your spending for that long. There are a few ways to make the process easier:

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    • Keep a notebook with your wallet, so that you have to pull it out whenever you’re making a purchase.
    • Write down every transaction, even if you get a receipt. It helps turn the process into a habit — and you’ll have one document with all your information.
    • Go with the paper route. Messing with texting your expense to yourself or shooting off an email just adds more hassle than a simple note.

    The important part of keeping this sort of ‘every cent counts’ record is to get the best data possible to work with. While some people can build a budget that they can stick to without such specific records, the fact of the matter is that most of us struggle to stick to a budget if we have spend without accountability. For those of us who fall into that category, budgeting becomes much easier when we already know how much we spend in a given category over the month. We know where we should cut back — and where we can cut back.

    Processing Data

    At the end of the observational period, you’re likely to have at least a few pages worth of records that you’ll need to interpret into a usable format. You may be able to spot patterns without doing anything in the way of processing, but it’s probably worth investing some time in the project and creating a spreadsheet with each of your expenses. Categorizing your expenses can make spotting patterns much easier — like picking up a candy bar every afternoon for a snack. These sorts of patterns are the starting point for changing your finances for the better. There are both good and bad spending patterns, and being able to see them can make a major difference in your ability to budget.

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    Once you’ve gone through all the data you’ve collected, it’s time to compare it to what you’d like your budget to actually be. There may be a large discrepancy between your plan and reality — the typical reason that so many budgets fail — so make note of where those big differences are. Breaking just one or two patterns may make all the difference in bringing your actual spending in to line with a budget: if something like a daily candy bar is driving up your budget, taking a step to eliminate the need for that candy bar (like bringing a snack to work along with your lunch) can make a dramatic difference. It’s worth noting that breaking a habit is often difficult — replacing it is usually easier. That fact applies to spending as much as any other habit.

    After an observational period, it almost always makes sense to end your financial tracking. It’s useful to get the sort of data you need to form a lasting budget, but it can be a fairly time-consuming process. Furthermore, you probably don’t need a cent-by-cent accounting of your finances beyond the planning stage. You may need to occasionally revisit your daily spending habits to make sure you’re still on track, but otherwise, reviewing your bank statements and receipts will more than suffice. It’s also worth looking into some sort of financial tracking application: while they may not be so useful in understanding the details of your spending, they can provide you with a broad overview that can be enough to guide you if you’re already on track.

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    Last Updated on March 29, 2021

    Life Insurance: A Secure Way To Protect Your Future.

    Life Insurance: A Secure Way To Protect Your Future.

    Life is a journey full of ups and downs. No one can actually predict what might happen the next moment; there are times where the happiest moments do not even take a second to turn into the gravest. Planning for your future can help you face such unwelcomed but irrepressible situations with much ease. We all want to make every memorable event of our life more special and to cherish all those moments happily and worry less, you must financially plan your future. But no one has control over life and death. Who would wish to see his family suffer in his absence? Insurance hands over the financial jeopardy of life’s happenings to an insurance company.

    Importance of getting a life insurance

    No one has control over life and death. Nobody would like to see their family suffering in an absence, and that’s why many people recommend life insurance. A life insurance plan is one of the best ways to secure the future of your family, even against those financial troubles after an untimely demise. These plans are safe and credible, and you could trust them for your family’s better future.

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    On the other hand, a life insurance policy is a contract between a company (insurance provider) and policyholder in which the insurance provider ensures to pay a certain amount of money to the nominated beneficiary in case of the policyholder’s death during the term of the agreement. There are different types of insurance plans, and it is important for you to know the benefits of those plans such as a funeral, medical or some life expenses provided they are mentioned in the agreement.

    Choosing the right insurance plan

    If you’re about to select an insurance plan, you should consider some important factors:

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    • The time at which you start investing in a program and the number of family members you want to get insured. Obviously, a married man with two children has different needs compared to a single one. The number of persons who are dependent on an individual also varies from person to person.
    • The next thing you need to consider is you and your family needs. What are your child’s dream, your retirement plans, for how long would your dependents need financial support, any personal injury, etc. And do not forget those events or situations that will surely demand a huge sum of money.
    • The next thing one must consider is your current income. You should preferably choose a plan which you can afford.

    Now you must be having a pretty clear idea of how to choose the best plan for you. Further, you should also compare various plans offered by different companies and numerous sites available online that help will you to compare them.

    Differences between life insurance plans

    Here’s a short brief of some plan categories you can choose according to your needs:

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    • Term Insurance Plan – You have to pay once, and your nominee gets the paid money under your misfortune demise. It ensures a person for a fixed time. If you survive the policy period, you do not get your premiums back.
    • Whole Life Policy – This plan continues for your lifetime. Under this, the policyholder has to pay regular premiums, until their death.
    • Endowment Policy –  In case the individual dies during the tenure, the beneficiary gets the amount assured. If the person survives the policy tenure, they gets back the premiums paid with other investment returns along with several other benefits.
    • Money Back Policy – In this a portion of the money invested is returned to the investor at regular intervals. If you survive the insurance term you get the entire amount back; else the beneficiary receives the entire sum assured.
    • ULIPs – These are the life insurance plans that offer you future security plus wealth creation options.

    Many people do not opt for whole life policy and endowment policy because of the high amount of money you need to pay, while others may prefer to opt for these if they have a high life expectancy. Surely you will find the best one for you.

    So what are you waiting for? Plan for your future and live a happier and carefree life today.

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    Featured photo credit: aryehsampson.com via aryehsampson.com

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