Retirement Planning For Dummies. Matthew Krantz
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and pencil: Yes, you could save your receipts and write down your expenses in a book. If you hate your computer, this method might work for you. But in this book, I skip this dead-tree approach because better ways exist for tracking your money.
Your bank’s online resources: Many banks put a lot of effort into boosting their website's budget feature. For some people, this approach suffices. Later, I show you the best way to use this feature.
Third-party apps and websites: There’s an app for that! You use apps to get from place to place and to order food. Why not control your spending with an app, too? An assortment of apps and associated websites can help you see how much you’re spending.
Spreadsheets: Third-party apps are slick but some come with a catch, charging a monthly fee or sharing your personal financial information. For some people, a good old-fashioned spreadsheet is all they need. I show you how to get started.
Using your credit card company or bank’s online resources
Using your credit card company or bank’s site to calculate your run rate requires minimal effort. The institution does most of the work for you, if you know where to look.
Plus, many banks and credit card companies are upping their game when it comes to giving consumers tools to track their money. Many will let you tabulate the amount you’re spending overall and by category. If you’re just jumping onto your credit card company’s site to pay your monthly bill, you might be missing out on an opportunity to learn more about your spending patterns.
If you log in to Citibank, a popular bank and issuer of credit cards, you’ll see a Spend Summary option. Click it and the screen shown in Figure 2-1 appears. You see the amounts you’re spending in specific categories, such as restaurants or entertainment. For most categories, you can drill down and get additional detail. You also see the total amount you spent. Most banks offer similar features.
FIGURE 2-1: Like most banks and credit card companies, Citibank tracks your spending.
But you’re not done. Remember that you have other expenses that may not be picked up by the credit card issuer’s site. For instance, if your checking account is elsewhere, checks you write for property tax or insurance aren't included. Remember to include these additional expenses.
When looking at each of your expenses, picture where the expense fits in the major categories. Is it overhead or discretionary?
Some people hold their savings and credit cards at the same bank. If so, you can get summary spending information from the bank’s site. Others keep their checking and savings accounts and credit cards with different financial institutions. If that sounds like you, you’ll need to consult the online resources of both your bank and credit card company.
If you’re going this route to track your run rate, make your life easier by using only one credit card. Remember, if you pay off your credit card in full each month (which you should), you’re essentially getting a free monthly loan. Also, you get a more accurate and complete picture of your run rate.
Diving into the world of third-party apps and online tools
If you’re like most people, your smartphone is always at your side (or in your pocket). So it’s only natural to use this device to monitor your spending. Thanks to your smartphone’s capability to send you alerts, it can be a helpful tool in keeping you in close contact with your spending.
In this section, I describe some of the major providers of money-tracking app and websites. If you’re interested in a broader view of money-management apps — especially how they can be used to track your brokerage accounts, check out my Online Investing For Dummies, 10th Edition (Wiley).
The big daddy: Intuit’s Mint
When it comes to an all-encompassing website and app to track your spending, Mint (www.mint.com) is the one to beat. Mint is backed by the deep pockets of Intuit, a firm with many years of experience in financial technology.
Mint is free. Here's how to sign up:
1 Log in or create an ID.Go to www.mint.com and create an Intuit ID. If you already use TurboTax Online, you can use the same username and password.
2 Link accounts you want to track.Enter the username and password for your credit card accounts. Mint will then pull in your spending information from those accounts.
3 Go to the Trends tab.
4 Under the During option, select Last 12 Months.Mint summarizes your spending for the past year. You now have your run rate!
5 Check out your spending by category and your total spending. It’s particularly useful to look at spending by category, as shown in Figure 2-2. Knowing that you spend $100 a month at McDonald’s is good, but knowing that you spend $1,000 a month going out to eat is valuable information. Tracking your spending by category lets you spot trends, such as an out-of-control addiction buying collectibles or an entertainment budget that’s larger than your friends (maybe it’s time for them to pick up the restaurant tab sometimes).
Mint has a matching app that you can download for iOS or Android, so you can track your spending and run rate right from your smartphone.
Another way: Quicken
If you're not comfortable sharing your personal information with Mint or you want more control over how to slice and dice your data, try Quicken.
FIGURE 2-2: Mint.com provides an easy, free way to see where your money is going.
Quicken is old school, but it's a good option for some people. The Deluxe version costs $50 yearly. Unlike Mint, Quicken stores your data on your computer instead of on a remote server (unless you choose to store it on Quicken’s online service) and doesn’t pitch financial products.
To find your run rate, go to the Spending tab. Quicken gives you precise control over time periods and types of spending. The 12-month view, shown in Figure 2-3, provides your run rate.
Using what you have: Microsoft Excel
If you’re like most people, every computer or tablet in your house has Microsoft Office. It just so happens that Office’s Excel, shown in Figure 2-4, is good at tracking expenses. The benefit is that there’s no additional software to buy.
To download free spreadsheets to help you get started, go to Microsoft’s Excel template center at https://templates.office.com/. Enter the term budget in the search box. One of my favorites is the personal monthly budget at https://templates.office.com/en-us/Personal-monthly-budget-TM04101071.