There’s an implicit (and sometimes even explicit) rule that drives almost every single decision that we take when thinking about money: Spend less than you earn. If you are spending more than you earn — with my only current exception being if you are a student in college — you will not be financially successful.
While that simple phase is both completely true and is easy to say, I know that it can be much harder to do. There are two critically important pieces of information that you need in order to know whether you are on track for this fundamental rule.
- How much are you spending?
- How much do you earn?
Much to the agony of my wife, I track nearly every single dollar that we earn and that we spend. Having good data to reference has been incredibly useful for everything from taxes, saving for college, tracking progress against another long term goal like buying a house, or being able to set a (rough) budget.
My dad used to keep all of his receipts and record the amount that they spent on a paper ledger. Obviously, there have been some major advances in technology since then, but they are only helpful if you put them to use. The secret that is mentioned in the title is that if this process is really going to scale and be something that you can keep in place for the long haul, it has to be automatic (or at least pretty close).
In 2008, I signed up for an account on a new site that promised to make tracking your finances easy, automatic, and secure. That site was mint.com. Nearly 13 years later, I can’t imagine being able to keep up with everything without it.
Mint removes the majority of the tedious work required to track your income and expenses if you let it. That last part is important because Mint can obviously only get access to the accounts that you let it. If you only grant access to a small subset of your accounts, you will not be able to see your full financial picture. I personally started with my main credit card, but then soon after added the remainder of my accounts since I was seeing so much value of the aggregated data.
When you connect and authorize Mint to connect to a new bank, it will automatically download as many transactions as are available. Then, based on the transaction information provided, it will attempt to categorize as many of those as possible into a broad set of groups and categories. You can continue to use those predefined categories or you can add additional custom ones should you choose.
I’ve kept the additional categories to a minimum which has been a recommendation I would extend to you as well. You’ll minimize any manual re-categorization that you need to do by limiting those custom additions. I personally typically check the categories on charges when I review everything for any fraudulent transactions, but the fact that all my transactions are in one place means that it’s a quick occasional task to do so.
Now that you have your categorized data, you can start to glean all sorts of information from it. The budgeting process definitely deserves its own post, but without even getting into those details you can start to see the value. One of Mint’s automated insights tracks your cash flow for the month (and historically). This single stat allows you to see in an instant whether or not you followed my golden rule of personal finance.
Did you spend less than you earn? I sure hope that you did, but if you didn’t, don’t be disheartened. Now that you have this information (either way), you can start to make the changes needed to improve your financial future. Find the other spending hacks here on Spend This, Not That that resonate with you. Develop and nurture your money mindfulness. Every person’s financial journey is different, but being cognizant of the whole picture is critical to your success — and if you will be successful if you do.