How to Improve Your Relationship with Money

Lots of us have a bit of a love/hate relationship with money.

If you feel like money is always running out on you just when you need it most, it’s time to take back control (to borrow a phrase) and show it who’s boss.

It’s not hard with a personal money tracker, and while monitoring and controlling your finances won’t necessarily improve your income, it will help you manage and budget better.

And if you’re also in the jobs market, or looking to improve your long-term career prospects, you could find a new fascination with how money works and decide on a professional career in accounting. Your skills would certainly be in demand.

Why Create a Personal Money Tracker?

It helps if you start thinking about your personal finances in a business-like manner. Just like a business, you need to keep track of what’s coming in and balance it against what’s going out.

This is where lots of people go wrong. They don’t take enough notice of all the small spends every day or week, and it’s surprising how they mount up. Just spending a couple of quid a day on coffee with friends in your lunch break can add up to around £40 a month.

That’s just one example, and no one is suggesting you stop having coffee with friends. Just being aware of the mounting cost is enough, so you can factor that amount into your budgeting.

How to Make a Personal Money Tracker

All you need is a notebook and pen. If you prefer digital records, use a spreadsheet programme or app to note down your expenses and income.

However you do it, you’ll need four columns:

• The Date – so you can keep track of when.
• The Item – so you know what you bought or where money came from if you’re recording income.
• The Cost – how much you spent or earned.
• Your Balance – to keep a running tally of money available.

That’s it. That’s all you need.

To get started, dig out your latest bank statement and write your current balance at the top of the balance column on your tracker. Next, also on your statement, scan through for direct debits still pending for the month, and add them onto the tracker now, subtracting from the balance to give you a new, real figure for money available.

As the month progresses, jot down your spends on the tracker and update your balance.

At any given time or date, you’ll know exactly how much money is available to spend or save and make better-informed decisions about spending.

Each month, start a new tracker for the month. Kick things off with your balance from the previous month and subtract your upcoming direct debits and regular expenses or bills.

How to Use Your Data

Over a few months you’ll build up a valuable picture of your money, with a detailed record of what you’re spending, where you’re spending it, and how much.

These details can really help you start managing money better. It’s a similar system to the one businesses use to track profits and losses, and it forms the basis for professional accounting. 

By looking back over your spending, you can identify your biggest money traps by focusing on categories of spending. You can, for instance, separate your motoring expenses and add all those up. Or your groceries, or your clothes shopping, entertainment, meals out… there are lots of categories you can analyse when you’ve itemised your monthly spending. 

Once you know what you’re spending on things, you can decide if you want to cut back a bit or find cheaper alternatives.

It’s a much more sustainable way of trimming expenses than making tough decisions to simply cut out things you enjoy to try and save money.

Keeping Receipts

Businesses need a paper trail, but you don’t. However, if you find you forget to add items onto your tracker, or it’s a chore to carry a notebook around and be constantly getting it out while you’re shopping, ask for and hang onto receipts when you buy something.

Often these days, especially with contactless payments, vendors or shops assume we don’t want a receipt. If you’re not offered one, ask for one, and if you are offered, say yes. 

Save those receipts till you get home, then sit down at your leisure and bring your tracker up to date. You can do this daily or leave it for a week if that works best and have a personal accounting session over the weekend.

The pile of receipts will remind you to update the tracker, because you don’t throw them away until they’re properly recorded.

This super simple system will help you get on track with money and start building a better relationship. It’ll cut down on money stress and give you a clear idea of how and where you can make savings.