Finding a system to track your spending
This is week two of the Bermuda 14-week plan to radically improve your finances
The original article from Business Insider promoted taking 14 days for your personal financial review, but if you are like most working people with careers and families, your free time is often predetermined for family first. We’ve stretched the duration of your review instead to 14 weeks straight, ending on October 31 — Halloween.
A link to week one of the plan can be found here.
For this week, find your 90-day number by reviewing all of your current financial data for the last 90 days: bank statements, credit card statements, possibly mortgage statements, receipts (if you save them) from the wonderful money (ATM) machine, purchases. Don’t forget to include cash you have earned on the side, even if you spent it.
Two basic tasks to start with. Calculate each month individually first.
• Income: add it all up — easiest way to do this is to check the total revenue deposits column of your bank statement each month, then total it — don’t forget that side cash — even if you spent it.
• Spending: add up all of your spending on the withdrawal side of the bank statements column. Then subtract that total spending number from the total income number. Hopefully, your net balance for 90 days is still a positive, not in the red.
Categorising your spending habits
This is the toughest, most annoying section of this exercise. How on earth are you going track all the little items? Heck, you sure know what your mortgage or rent payment is — to the penny while groceries, electricity, cable/phone/internet, transportation (gas for bike/car) are fairly predictable. The rest of that spending, especially the ATM withdrawals, will be challenging since the informal rule on spending is this: the smaller the cost of the items, and the larger the number of cash withdrawals, the harder it becomes to remember just exactly what it was that you did buy. Especially on those days when you’re harried and everything in your life seems out of sync.
The Just Don’t Know category
Take the attitude of no moral philosophising, such as were these expenses necessary or just regretful splurge items. Simply designate all those items in the Just Don’t Know category.
Tracking systems
I’ve done some research on systems that may work efficiently for you. Your options currently are:
Electronic spreadsheets
• The Do-It-Yourselfer can use a generic electronic spreadsheet. There are countless downloadable templates that you can tailor for your personal use. Free spreadsheet software is available from Apache Open Office — looks and feels just like an Excel spreadsheet. Now at 100 million downloads.
• Use a commercially set up budget planner (also free) such as Open Office or Vertex — links provided here for two of them. The Simple Budget Worksheet is featured in the accompanying chart — tailored for the Bermuda environment. Once you download it from Apache Open Office, change the descriptions to match the picture. Or e-mail me, I will send the modified worksheet.
• And there is the much more detailed Personal Monthly Budget Planner from Vertex.
Personal Financial Management Software
• These software packages have the ability to link to your personal bank and investment accounts, then download all income/expenses by category. Using a programme such as Quicken, Mint, Buxfer’s, PocketSmith may work, but you will have to enter all items by hand because unlike the United States’ sophisticated banking/investing systems, inquiries to and feedback from a reader found that Bermuda banks do not offer an automatic download income/expense categorisation services. Note — this is a much needed service for the Bermuda consumer banking public.
Manual
• Tracking the old-fashioned way, by hand, using legal or two column 8/11 inch lined paper — one page for each set of expense categories. Adding the totals up each month then entering on your Master Budget Sheet for the month and the year. Use the Open Office Budget Sheet picture to help you set up your pages.
Ready to Go — Start with The Basics.
Try not to feel overwhelmed initially, just keep going. Start with the Simple Budget Budget Worksheet linked above. Referring to your bank statement from May, three months ago, enter your monthly (or weekly x 4) income. Then list your expenses, starting with the ones that you know you have to pay: rent/mortgage, groceries, utilities, internet, phone, etc.
The worksheet will automatically subtract your expenses from your income. Now, look carefully at your budget worksheet balance — right now it is listed as savings — but we know you have not accounted for the rest of your expenses. Compare the worksheet balance to your bank ending balance (subtract out the beginning balance to get the true net monthly cash left, if any).
The difference between the two is going into your Just Don’t Know category. Now how much real cash savings did you have left?
Repeat for the next two months. Can you see a pattern? How can you resolve these unknown expenses when looking at your current month of August? By setting up a simple necessary budget using your real numbers to filter out and control the random spending. More on budget planning to come.
Feeling bad that your net monthly savings numbers aren’t better? Don’t forget that you are saving — if you are currently employed. Your Bermuda National Pension Scheme is putting away 10% of your gross salary every year. Monitoring your pension accumulation to-date (covered later in the 14-week plan) is another opportunity to manage your finances going forward.
Feel free to contact me if you need help in understanding categories or spreadsheet workings.
Next week: Let’s talk about debt.
Readers, I am working on a future series about retirement in Bermuda and want to hear from individuals who have retired (and don’t mind sharing anonymously). How are you managing? What are your concerns? How do you feel about retirement, mentally, physically and financially?
Those readers who have responded, thank you.
Martha Harris Myron CPA PFS CFP JSM, Masters of Law: International Tax and Financial Services. Appointed to the Professional Tax Advisory Council, American Citizens Abroad, Geneva, Switzerland. The Pondstraddler* Life™ Consultancy provides cross border financial planning for internationally mobile individuals and their businesses residing, working, crossing borders, and straddling ponds in the North Atlantic Quadrangle. Specific focus on residents of Bermuda, the premier international finance centre. Contact: martha@pondstraddler.com
