04: Tracking How Much You Spend
Today, we’re talking about how much you spend. Take a deep breath.
There’s no judgement here. This isn’t about chiding you for spending money on [insert thing here] instead of [insert other thing here]. I literally don’t care how you spend your money, only that you know what you spend and feel good about why.
This episode isn’t about budgeting. It’s about data. Budgeting is a blanket term people use to describe a couple of different things, only one of which is tracking (aka data gathering). The other thing, if you’re interested, is changing your spending habits to fit within certain boundaries. You might decide to do that, it might be worthwhile, and we’ll talk about how to get started in a future episode.
Why is this important?
You need to know how much it costs to keep body and soul together, period. Taking time to structure a system you can live with now is a gift to future you for a whole bunch of reasons:
Will future you have to take a pay cut to get out of a toxic work environment? Are you - like me - fundamentally ungovernable and can only truly thrive as your own boss in your own business? Knowing the minimum amount that has to hit your bank account to cover the necessities of life and a decent amount of fun and joy is the key to planning your escape, or practicing for hard times.
I know most of you have the resources (and resourcefulness) to manage hard times without planning for them first, but trust me - this exercise will make that one easier. So much easier.
Setting Up Spending Tracking
There are so many ways to track your spending, and you can choose one that works for you based on how much effort you want to put into it, how many different spending accounts and credit cards you have, and how much privacy you want to have.
Digital
Speaking generally, digital tracking is going to be the least amount of effort and the most amount of privacy compromise.
If all of your accounts are with a single institution, and that institution already aggregates your spending in your online banking dashboard, you might have all the information you need ready to hand, no further work or privacy compromises needed (other than the privacy compromise of your financial institution categorizing your spending and using it to sell you their products).
If you have accounts with multiple institutions, or your bank doesn’t offer aggregation or reports your spending in weird ways that you can’t customize, there are a couple of digital platforms that you could use. **Here’s where I insert my obligatory disclosure that I do not accept referral fees and the links to these services aren’t affiliate links. Nobody pays me but my clients.**
Three platforms I appreciate are Commons (US), FINA.money (US) and Neontra (Canadian). All three use bank-level security to protect your data, and can be connected to your accounts by using services that log in, download your transactions, and aggregate them into reports, which can very quickly give you very good data on how much you spend and where you spend it, even if you don’t want to take the time to customize the categories or reports.
But!
Until open banking becomes a thing in Canada, giving your bank credentials to a third party, no matter how secure their operations are, is always going to be risky. While connection services can’t charge your account, withdraw or transfer money, or create a transaction on the account, your Canadian bank account agreement likely bans you from doing so, and probably limits any fraud protection they’d be willing to offer you if they catch you.
Hybrid
If you don’t want to risk giving your bank credentials to a third party, you’ll need to put in a little more effort in exchange for giving away a little less personal information.
Every bank and credit account allows you to download your transactions, which you can turn around and upload to Fina or Neontra (or some other platform) manually. It’s not automatic, and it takes longer, but the output is the same as if you let the system download it automatically.
Another option is to download your transactions into a good old fashioned spreadsheet, and use it to add up the total amount you spend. Unless you’re a spreadsheet jockey you might not want to try using it to categorize your spending, but if all you need is the total amount this is a fairly painless and pretty private way to do it.
Analog
If you hate spreadsheets, don’t even want to look at a digital solution even if it’s not connected to your bank account, and have a highlighter and a good sharp pencil, you can go through your bank statements and get the same kind of overall picture as you would with the spreadsheet method. This takes longer, but you’re not sharing your information with anyone.
No matter what method you use, pick a time period that makes sense to you to measure by. Lots of people track their spending by month, so if you don’t have a strong preference, start with that. Review your monthly spending amount across all accounts, and start making a habit of checking it every time the calendar flips over. You might not do anything with the data, but there’s a non-zero chance that future you will be so happy you put in the effort.