Spring cleaning is such a chore at times. There’s always yard work or the need to clean the garage. Possibly, it’s sorting through all the junk you’ve collected and neglected inside your home over the winter. I know we’re guilty of that one! There’s always something to be done.
It’s also a great time to stop and look at your finances. How much money did you spend last year or last winter? How much did you save? Do you know what you’re spending on? Do you have a summer vacation you were hoping to take? Possibly you have bigger plans to buy a home!
It’s so easy to get into a habit of just spending money. Credit cards make spending infinitely easier. According to Prelec and Simester of MIT, consumers will spend upwards of 100% more on a credit card instead of cash. My wife and I were in that position for at least 5 or 6 years after graduating from college. Anything we made was freely spent as long as our housing was covered.
The first thing that we did was sign up for Personal Capital.
The free software allowed us to link all of our accounts and see how poor we really were. It’s one thing to know you’re in debt, but it’s another to see it.
Personal Capital also lets you track your spending habits. For example, each of your transactions will show up and you can individually categorize them.
With your accounts entered and purchases categorized, the budgeting section will have data on where you’re spending. The downfall of this version of budgeting is that it’s not really budgeting. It’s only tracking because you’re not setting limits.
Budgeting requires you to take the initiative. With the data gathered from Personal Capital, the next step is to actually set a budget with limits on what to spend in certain areas.
The website is super simple and they have tons of quick videos on how to quickly set up your account. My wife and I love it for the fact that we can both see everything individually on the phone app as well.
YNAB is based on the envelope method of budgeting. Once you run out of money in a category, you either have to wait until next month or steal from another category. This prevents you from overspending.
Like Personal Capital, YNAB also allows you to link your accounts so that transactions import automatically. It’s then your job to properly categorize them. Once YNAB learns how you spend, it will begin assigning categories automatically and all you have to do is approve the transaction.
It’s also perfect for setting goals. You can color code and set dates to save for a specific event as well. Got a vacation you’re saving for? Set up a specific category for that trip and intentionally ave for it. We all know Christmas happens annually. Why not set up a category to save for it?
A fresh new look
I know that I always felt better after a good spring clean and a solid plan heading into the summer. Set some time aside and clean up your finances too!
Without these tools, we wouldn’t be in the financial place that we are currently. Once you know where you’re spending, you begin to realize what’s important to you. Does your spending reflect your values? I know ours didn’t when we first started!
Take a look at the money tools that we use!