Are You Obsessed With Your Finances?

Hello, my name is Jason, and I used to be obsessed with updating my finances. Everyone in unison: “Hello, Jason.”

Yes, this used to a be a problem for me. There was no real reason to update my financial account balances daily. After all, other than a couple taxable investments, most of our savings are sitting in cash accounts with interest added only once a month. Our checking account doesn’t see much traffic either.

However, I often spent the first and last minutes of my computer time each morning and night updating various account balances on elaborate spreadsheets I wasted even more time creating.

50/365: Hanging in the balance on Flickr by betsssssy

The activity on our checking account is much lighter since we’ve started running all monthly expenditures through a cash back credit card and paying it off each month. It is a process that is much more convenient, but a little scary for those like us who only recently reached debt freedom. As a refresher, here’s how the system works.

Tracking Finances Using a Single Source

After we became debt free, we converted our lone credit card account (with our credit union) to a cash rewards card. We add up our total monthly expenditures on things like utilities, car insurance, cell phones, etc. and budget for this amount each month. But, instead of paying each bill directly, we have the amounts billed to our credit card and make one single payment each month.

As we prove to ourselves that we can handle paying off the credit card each month, and not squander the budgeted money throughout the month, we are slowly adding other budget categories into this plan. For instance, instead of paying for entertainment purchases (the occasional meal out, or trip to the movie theater), we simply use our credit card and include it in the payoff each month.

The beauty of this plan is that it only requires us to access one account each month to track our spending. Currently, we download the transactions from our credit card issuer’s website into Quicken , where I also track our investments and retirement accounts.

After downloading the transactions into Quicken, I run through the list of imported transactions with two goals in mind. First, I make sure the charge is legit. Second, I assign a spending category from our budget to the transaction – Entertainment, Utilities, Insurance, for example. After tracking purchases this way for a few months, you should be able to identify certain spending patterns and make small course corrections along the way.

For instance, we noticed that out Food budget had increased because we were buying more organic foods. To offset the increase, I limited lunches out to two days a week (sometimes you just have to get out of the office), and brought leftovers on the remaining days of the week.

Couldn’t You Do the Same Thing With an Envelope Budgeting System?

Yes, you certainly could. In fact, we did use an envelope budgeting system through Mvelopes for some time while working through our financial turnaround. However, we have found that it is much easier to simply run regular purchases through our credit card, earn a little cash back, and pay off the bill each month. We won’t be getting rich off the cash rewards, but an annual bonus of $200-$300 is nothing to sneeze at.

The real benefit of this plan is that our finances are pretty much on auto pilot for most of the month. Automatic savings contributions are made to our online savings account and our online brokerage. Our biweekly mortgage payment is drafted from our primary checking account. All monthly expenditures are made with our credit card and paid off in a single payment each month.

This frees up our time to focus on things more important than money.

How do you track your finances? How often do you update balances?

Comments

  1. Yes I do track- especially the investment account. I write it all down once a week. It helps me watch my stocks (since I am my own mutual fund:>)
    Expenses and other accounts- not so much. I am an addict (which is why I am here at 7 am instead of getting ready for work!)

  2. I’m Jenn and I too am obsessed!
    Our system is very similar. We run absolutely everything possible through our credit card which earns airline mileage (Aeroplan for Air Canada). The only exceptions are our mortgage which comes out of checking every other week, and electicity and property taxes monthly. These three cannot be charged to a credit card.

    I choose to pay off the credit card every Friday afternoon. Most of our errands/spending is done on the weekend so by Friday all the charges have been posted to the card’s online site. I update the estimated and expected numbers on our spreadsheet with the actual numbers and pay the balance. Yes, I could do this monthly but it’s a much easier task if I keep on top of it and I can deal with any errors or suspicious activity sooner. We used to have all recurring bills (phone, cell, internet, alarm, insurance) charging to our checking account. Now we earn miles for those charges. We also run all groceries and gas through the card. I view our process like paying with a debit card that has a 6 day delay before hitting our account. We buy on Saturday and pay on Friday. It doesn’t change our spending patterns, we just earn flight mileage for it now.

    As of this week we now have enough miles for our four flights to Europe this summer. I love free flights for doing exactly what I was doing anyway.

    Theoretically I only need to check the VISA and bank sites every Friday to update the spreadsheet with the actuals, pay the VISA, and make sure that week’s paycheck has arrived (we’re on alternating weeks). Once that’s done any “excess” cash is transfered out to our retirement savings or an extra mortgage payment . With my spending plan mapped out to the end of 2010 for now, I can see how much can be skimmed off without causing a problem in a future week. While I only need to do this monitoring weekly, in reality I do it almost daily. I can’t explain why I do it, maybe it’s a control thing? While I strive to avoid spending in general, I enjoy monitoring the details of our spending. Weird, I know. I guess the upside is that at any moment I know exactly where we stand but I know deep down I need to relax a bit.

    • I like the idea of paying off the Visa every week (or in our case, biweekly), as paychecks arrive. This lessens the chance that the balance builds to the point where it is too tempting to only make a half payment if your cash gets to diverted somewhere else.

  3. In my own experience, I have found checking balances on those types of investments often leads to me making irrational moves. Better to check periodically just to make sure nothing catastrophic is happening.

  4. Frugal Dad,
    Don’t fall off the bandwagon and back into the pit of CCs.

    Sure, perhaps I’m an extremist, but no CC for us. They provide the constant temptation to go back into unplanned, irrational spending.

    Cash only for us, with a debit card for gas and groceries. I update Microsoft Money when we use the debit card, and I really only have to pay bills twice a month through online banking. Pretty simple.

  5. I’m glad this post came along. I fear that I obsess about my finances.

    During work, I find that I check all of our CC, student loan, and checking accounts. I could probably make an argument for checking the CC regularly… but the student loans only change on a monthly basis. And my checking is used to only pay bills, so I know when and how much…

    I’m trying to break my habit, but it’s so hard to do… help me… LOL.

  6. We also use Quicken and we have found it very helpful. It is great to be able to set your budget and track to see if you are going over. We don’t obsess per say but we do make sure to enter our receipts every couple days. This just makes sure that our balances match at the end of the month.

  7. The only things I update and keep track of very closely are credit card charges. I track those on an Excel spreadsheet in regard to amount, date of transaction, and the credit card used. As a result, the statements are never a surprise.

  8. My problem is that I check my brokerage account and retirement accounts daily… I need to stop this, it’s a waste of time…

    Hey, I love look of the new site, looks very cool!!!

  9. Just remember where those cash ‘bonuses’ and frequent-flier miles come from: the paychecks of other poor suckers who are in-debt up to their ears. For every 1 winner there have to be 19 losers. Kinda has the same financial setup as gambling…except it’s behavior-oriented rather than chance-oriented.

    If everyone followed your strategy and succeeded, the credit cards would go out of business. Therefore, they have to milk a ton of people to pay the ‘rewards’. I’m not comfortable enjoying such rewards.

    • Sid, that’s an interesting take – one I had not thought of. As far as cash rewards go, we could consider that credit card issuers make a small percentage on every charge that I make, and return an even smaller percentage to me as a cardholder. Yes, they are encouraging me to use the card more, but even so, I pay it off each month to avoid interest – and they still make a spread on merchant processing fees.

      • It’s not an angle most people consider. I’m a long-time dyed in the wool Dave Ramsey fan, but this is one I haven’t heard even Ramsey rant on: and he rants on everything credit card. I don’t recall having read it anywhere else, though. It just came to me one day as I was reading how many people continue to rationalize the use of credit cards. Their last resort always seems to be the ‘freebies’. So I considered where those freebies come from. Yes, one could argue that they are funded by the merchant spread. I doubt that’s truly the case since the spread on fees in somewhere between 1 – 5% on transactions, and that means you’d have to charge an enormous amount each year to cover your $200 – $300 freebies AND still allow the credit companies to make money after paying for their huge staffs, overhead expenses, plus stockholder dividends and lavish corporate offices. Much more plausible, it is those 18% interest rates and ridiculous over-draft fees, late fees, and other crud that is funding your bonus.
        I’m not trying to condemn you, FD, because I do like your blog and advice. However, it’s best to think all things thru to their logical conclusion. The old phrase, “There is no such thing as a FREE lunch (or reward miles) applies.” Anytime someone says “free” (i.e. free government money, free loan repayment), I shake my head. Ignorant at best, flat-out lying at worst.

        • Sid I do see where you’re coming from. But it can also be seen as a wake-up call to those who are using their credit cards irresponsibly. I would rather be taking the rewards than knowing that some rich guy out there is sitting in his couple million dollar home enjoying the reward of as you called it those ‘poor suckers’. At least I’ll be spending it back into the economy which can then help me do my little bit to stimulate it and help people keep their jobs. Plus, there’s also that annual fee I have to pay each year to own those credit cards. I doubt the credit card issuers would give the bonuses I don’t take to people that owe them money anyway.

          • The bonuses and rewards are carefully planned and computed by actuaries who know the odds are set up that eventually even the best, wisest, most frugal person will fall into the trap given enough time, distractions of life, etc. Even if a person goes 30 years and never pays a dime in interest or fees, you’ve still willing spent how many more thousands of dollars in merchant transaction fees. Merchants used to give discounts for cash (and some still do), but most now accept it as a cost of doing business and it gets passed on to all customers. The cost has become invisible to most people, and now a whole generation has grown up that doesn’t even recognize that they are overpaying by 1 – 5% due to Americans addiction to plastic. It’s a not always worth it for trivial purchases, but if you learn to negotiate with cash on day to day transactions, you’ll do far better when you buy a car, boat, or house someday. A cash real estate buyer can often save 10 – 30% over a loan buyer. When you get into a $100,000 house, those $200 yearly credit bonuses are pretty skimp. But you have to train yourself how to do it and be in the position to do it. I just don’t know too many ‘responsible’ credit card users who pay cash for the real big ticket items (no, not a plasma TV, I mean a REAL item like three above). To each his own.

          • This would not let me reply to Sid’s below. – so this is out of chronological order…. Have to agree with Sid on a few things… Cash does talk. While I feel I use one credit card responsibly, mostly for online purchases, cash saves a lot. My house I paid cash for – and I know the closest offer was 30% above mine… that’s a LOT… but I had cash and could close in a week, and there was no worry about financing the other people nor the house financing… So I saved BUNDLES! Being able to pay cold hard green cash also saved on many repairs and remodeling.

            My travel trailer – same deal – paid cash – took the title, and done deal. And my truck – paid cash – altho the dealer looked at my credit and said I could finance anything in the lot I wanted, why settle for a 4 year old truck, but I successfully stuck to my guns and got the used truck and paid cash.

            When I am dealing with anyone outside of a grocery store etc, I always ask if there is a discount for cash… lots of times there are :)

            So – yes – responsible card users CAN pay cash for the house, the recreational item (boat or trailer), and the truck :)

  10. My name is Crystal and I had this problem too.

    We’ve always had all bills possible charged to our Discover or Mastercard, but I was updating our Excel budget with every single charge every day or two. Now I do it once a month after checking the statements for errors. I only check the statements once a week now to keep an eye out for fraudulent activity. We’ve never carried a credit card balance month-to-month, so this system works for us.

    Having my own personal finance blog has helped me to quit checking on our investments two or three times a day as well. Now I check every week or two and post our net worth monthly. Honestly, I think it is healthier for me to stop obsessing and concentrate on blog posts instead…

  11. I used to do it once a month.
    Now I just do a financial asset sheet twice a year and call it good.
    Once in January when all the totals are available for tax filing anyway,
    and again around July when I make sure I am on track.

    That’s it. After years and years of living frugally, it is not necessary to keep right on top of it, as the spending habits are sooooo ingrained and habitual that is not a problem.

  12. I work for myself online and have many revenue streams…. I am not obsessed about checking my finances but am obsessed about checking my earnings. I check adsense and affiliate networks multiple times per day for no reason!!

  13. I too check my finances a few times a day if not more. But, about 8 months ago, I dropped MS Money (b/c they’re no longer supporting it), and went to Mint.com (since bought by Intuit). Mint allows you to connect to your bank(s) and view your financial ‘picture’ all in one window. It connects to brokerage firms, banks, credit unions, etc. I’ve found this to be the easiest solution I’ve come across. Heck, Mint even has an iPhone application that allows me to check account balances, etc, on the fly, making it even easier….so I really don’t spend THAT much time overall.

    More on the original topic, I tried the charge-everything-to-the-credit-card-and-pay-it-off-monthly approach a few years ago, and although it seemed like a good idea in principle, it simply did not work out for me. I found I slowly began to allow balances to roll over, thus being charged interest. If your’re not as disciplined as FD, you may want to consider an alternative approach. I’m also a die hard Dave Ramsey fan, so no credit card usage for me….debt free (but the house) since 1/2010, and loving it. Your income truly is your best wealth building tool.

    My two cents…great site, BTW….just found it….

  14. I use Quicken as well, but the full version that tracks investments and daily prices so I pretty much know where I stand every day. I too use my airmiles card for all purchases, including groceries – download the transactions every week then simply move the money virtually in Quicken between the savings account and the credit card – that way I’m still getting a small amount of interest until I actually have to pay the bill but know exactly how much money is needed to replenish the account when I get paid. Being only recently debt-free (consumer and mortgage debt-free for just over a year now) this is the kind of control I need to stay on budget and meet my savings targets for household repairs and property taxes, vacation, emergency fund and retirement planning. Maybe when I’m more used to the budgeting lifestyle, I’ll not feel the need to know daily where I stand. Although, with the software it really is just minutes to bring everything up to date.

  15. I too used cash envelopes for a period but have moved over to making out a monthly spending plan with rolling category balances.
    I keep an index card in my wallet with all my budget category balances written on it in pencil, update it with my purchases, and refer to that before spending, in preference to my checking balance. And I do use my cash back credit card for many of these purchases because using this system I’m not going to spend beyond my budgeted amounts, so getting the 1-2% back on money I knew I was going to spend anyways makes sense.

    The credit card gets paid off like clockwork and it is a normal, non-stressful transaction: The money was already in my checking account and budgeted for things like gas, groceries, and clothes, I executed the purchases with my credit card, and now I am transferring the money to the credit card company as planned.

    I do use software to keep track of things: I use an Excel workbook of my own design, but YNAB is probably the best longterm option for those who don’t want to spend the time programming, or PearBudget online which works the same way would be a good way to try it for a few months for $3 a month.

  16. I track my monthly Finance report, and keep updates about every 1-2 weeks. at the end of the month, I add all of the results to my yearly finance report.

    I use only 1 mastercard, and when they don’t accept i rarely use checking account. All my checks go into my savings account. I rarely use cash-on-hand, but I always carry for emergencies when cards don’t work. And if I DO use cash, I track it before i forget.

    For those that are just getting out of debt, and don’t want to use credit cards, I suggest doing it anyways. Just pay off your balance before its due and never pay interest for it, I never ever have. ALSO to FD, I would suggest using 2 credit cards for all expenditures; This will cause your FICO score to increase more (as long as you are paying it on time and in full each month).
    If this is too hard to keep track of or to stay ontop of, just stick to one. :)

  17. I also charge everything reasonably possible and pay off the bill all at once. I can’t pay it off weekly because only the balance on the card when the billing period closes count towards rewards – I paid off the card every week for awhile, but discovered that I wasn’t getting rewards equal to what I spent every month on the card.

  18. I use mint.com to keep track of my finances. I like to check there daily, just to make sure that bills have been paid when I expect them to, and that nothing unexpected has happened. I have caught occasions where I accidentally miss a bill payment, and get hit with a late fee (that you can usually get eliminated if you catch it early enough), or get hit with an annual fee that I forgot about (that you can usually get waived if you threaten to cancel). It’s also nice to see where my money is going – and how much is coming in vs. how much is going out. I don’t obsess about it, but having it all aggregated in one place makes it easy.

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