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.
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?