We started recording expenses about half a year ago. We wanted to reorganize our approach to personal finance a bit, and for that we needed a summary of current situation and getting to know our habits. We had some fears at the beginning. We wondered if it makes any sense at all or the potential benefits will not be offset by the amount of effort that will have to be put into the whole process. We were worried whether we would have enough strong will, if we would have enough patience and meticulousness, so that the results we receive at the end of the month, would be meaningful in any way. However, after a short conversation, we came to the conclusion that it is worth a try. Fortunately, it was already after the first month that our fears were largely unjustified.
How to start
The threshold of entry contrary to appearances is very low. The key is to choose the right tool and categories that we will use to write out expenses. This is an individual matter and everyone should prepare it for themselves. We started using the sheet created by Michał Szafrański, where a quite extensive list of categories is ready. The sheet is uploaded to Google Docs, which also allows simultaneous sharing by several people (for example, all family members).
We only had to slightly adjust it to our needs and we could start systematic data replenishment. You are wondering how much time you need to devote to this process. The number of entries in our sheet from the last few months looks like this:
Amount of notes in sheet
As you can see, apart from the summer months when there were clearly fewer entries in our case, we make about 110 entries a month as an average. At first glance it may seem like a lot, but if we divide it into 2 (two people update the sheet), there are 55 entries per month, which is less than 2 entries per day per person. Of course, this number will be a very individual matter and depending on the way of quoting. We do not break down each receipt into individual items, often the whole receipt, for example, is recorded as “eating at home”. If we do some more shopping where we have food, chemistry, clothes, etc. at the receipt, then we try to break the receipt into components, but in such cases we have only a few monthly. The vast majority of cases are 1 receipt – 1 entry in the sheet. Google works here quite well, after a while, the listing of expenses becomes a habit and from the perspective of these few months I can say with all my full certainty that the awareness of what our money goes through is much more valuable, than the 2-3 minutes a day we devote to on topping up the sheet.
If it’s so good, why is it so bad?
The basic problem that we came across, while recording expenses this way, was that we could not replenish the sheet on a regular basis, immediately after making the expense. Of course, you can edit Google documents on your phone, but it is not very comfortable and takes far too much time. In this situation, we try to record everything as soon as we find ourselves in front of a computer, but sometimes something has eluded us into the rhythm of other activities. Sometimes at the end of the month, when we were doing a summary, it turned out that our notes are not complete and amount of money left is not as qw expected. In this situations we were searching for items that we forgot for example at bank statements.
Here we come to the next drawback of this approach. In no case we track the status of individual accounts or cash in the wallet. The ideal situation is that at the beginning of the month, we enter the amount of individual bank accounts into the tool, note the expenses from which accounts we make them, and at the end of the month we compare the real account balance with the state calculated from the expenses we have made. Then it is known that we have recorded everything and that we have expenses under control. It is not possible to do it in a spreadsheet easily.
Some of the entries in the worksheets that we do every month are cyclical items, for example these are:
- repayment of the loan
- phone bills
- internet bills
- monthly savings
- transfers to target accounts
Human is lazy by nature and if something can be simplified and accelerated, why not do it? If these entries could be made automatically, the entire listing process would be even faster and more convenient.
Features of the ideal tool
From the description above and the problems we have encountered, we can already see the ideal tool for writing down expenses, from our point of view:
- Available in a fast and comfortable way on a mobile device – saving the expense should not take more than 20-30 seconds.
- Available via a web browser – for common analysis, more convenient entry of more items.
- Sharing data between all family members – everyone should be able to add new entries from any device at any time.
- Data stored “in the cloud” – access to data should be possible at any time, anywhere – just an internet connection. Here, of course, the question of data security remains – this topic will be discussed separately.
- The ability to automate repetitive items – standing orders, savings, transfers between accounts.
- Account status tracking – to make it easy to summarize the period at the end of the month.
Of course, we realize that there are a number of home finance management applications on the market. There is Microsoft Money, GnuCash, KMyMoney and many more. However, we have decided that we want to create our own tool, perfectly tailored to our needs. Ultimately, this will not be just a tool for writing down expenses. We have the ambition to create an application that will be able to do much more and significantly simplify control over the budget of the whole family. It is quite a challenge, so we plan to divide them into stages. In the next article I will try to present the scope of the first stage, along with the description of individual functionalities. If you want to receive information on subsequent entries, please subscribe to our newsletter at https://join.familyfinancetracker.com/