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Tracking Your Money

It's really no wonder that so many highly intelligent, fully functional people feel that getting a grip on their money is like trying to nail Jell-O to the wall. The next time you're feeling like a failure for not fully comprehending our modern-day money system, consider these facts about money today:

• Money is invisible – "Yeah, no kidding money is invisible," you're thinking. "Mine vanishes all the time!" That might be true as well, but what I mean is that we never actually see or touch most of our money. You could earn $50,000 a year and handle only $1,040 of it – $20 a week – in actual cash. Our banking systems are so fully automated now, with electronic payment methods becoming the norm even at fast-food drive-thrus, that carrying more than $100 cash can feel unnecessary and maybe even dangerous.
• Money time-travels – It's startling to realize how much of your money doesn't actually exist at a given moment. Consider the basic checking account. It seems like a repository for your cash, but that checking account is actually a short-term line of credit. The bank holds your money and lets you write permission slips for other people to come in and take some of it. So that money is committed to someone in the future, but for now it's still there. When you deposit a check, the bank might put a hold on it until it can confirm the money will actually come through. So, it might seem that you have the money in your account now, but in reality that money exists for someone else a few days in the past, and it won't be yours until a few days into the future. Mind-boggling, yes? Add in the phenomena of the ATM transaction that clears in 3 days, the 30-day revolving credit card account, and the 30-year mortgage, and you just might find yourself yearning for the old cash-under-the-mattress system.

If you're still feeling self-critical, don't worry. You'll lose the guilt once you've completed the projects in this chapter. Now, let's get started.

You'll need list

• Paper and pencil and/or your computer
• A case or container for your receipts
• Bills to be paid
• A calendar

Arming Yourself with the Right Organization System
There are hundreds of "right" ways to organize anything, whether you're trying to apply order to your finances, your garage, or your clothes closet, but every successful system has a few things in common:

• Comprehensiveness – The system covers the common components of the area it is addressing (for finances, that would be checking accounts and credit cards), but it can also accommodate not-so-obvious components (such as cash spending).
• Simplicity – The system is no more complex than it has to be.
• Appropriateness – The system is a good fit for the user's skills, patience, and available time.
• Flexibility – The system can be changed as needed when life changes come along.

A good organizing system has quite a lot to live up to. In contrast, you have just one duty: Consistency. No system, no matter how perfect, will work if you don't use it. The system has to do most of the work, but you have to create it and follow it for it to perform for you.

With that in mind, let's get started on your first project: a method for keeping transactions from slipping through the cracks.

To do list

• Set up a foolproof system for retaining all receipts and ATM slips.
• Make provisions for recording transactions with no receipt.
• Practice the new habits you'll need to develop to make your system work for you.
• Choose one place to collect your various receipts until it's time to enter them into the income and expense spreadsheet you'll create in the next section.

Building a Fence to Snare Every Last Scrap of Your Financial Information
What a relief it will be! Soon you'll have a reliable method for holding onto a record of every transaction long enough to get it into the tracking document you'll create in the next section.

Here's a problem that our prehistoric ancestors could relate to. Say you're a shepherd. It's getting to be dinner time, you're anxious to get home and put your feet up in front of the fire, and you look over your flock and think, "Am I missing one?"

Millions of years later, we get that same sinking feeling about our wayward receipts, check carbons, and ATM slips: the modern-day herd we each must tend. As sheep are notorious for wandering off to explore little outcroppings halfway down a cliff, our gasoline receipts seem to have the same fascination with that knuckle-scraping gap between the car seats. They say paper comes from trees, but behaviorally it has more in common with livestock.

So, how can you keep your flock from straying? Build an escape-proof fence in the form of a receipt-collection system that covers every possible scenario.

Your mission is to capture and hold a record of every single transaction you make until you're ready to process them. Your fence, so to speak, will be the collection of methods you use to make sure none of these rascals gets by you.

Changing Habits
Congratulations, you're already halfway there! Awareness of the need for change is half the battle. Now extend that awareness to attentiveness of your day-to-day behavior. Consider these questions as you prepare to build your fence:

• What types of transactions do I have? – Is it mostly bank-card purchases? What about ATM or drive-thru withdrawals or deposits? How often do you spend cash?
• What do I usually do with receipts? – Do you stuff them in your pocket or purse, throw them in the shopping bag, or stash them in your car visor or up on the dashboard? If you had to find a particular receipt, what are all the places you might think to look?
• What do I think I should be doing with receipts? – Is there a bowl or in-box that you always intend to collect your receipts in (even though that doesn't always happen)? Keep this spot in mind: It will probably become the center of your receipt-collection plan – the corral around which your fence is built.
• What do I always seem to lose? – You probably have at least one type of transaction that often gets lost. Think about why that happens. Is there something about this transaction that makes saving the record or properly storing the receipt inconvenient? My "problem sheep" are pay-at-the-pump gas receipts (I'm in a hurry, it's cold out, and I stuff the receipt in my pocket instead of my wallet) and Amazon.com purchases (I don't always remember to print out the onscreen receipt). Figure out which items seem to fall through the cracks and why, and you can mend a big hole in the receipt-corral fence.
• What if I don't get a receipt? – What happens if you write a check or use your bank card and for some reason they can't give you a receipt? Do you have a backup plan for capturing that transaction? This is another reason that pay-at-the-pump gas receipts are a problem for me: Sometimes the receipt printer is out of paper, and if I had time to go inside and get a copy, I wouldn't have paid at the pump in the first place!

Pay attention to what you do every time you handle money. Do you get a receipt or make a record of every transaction? If not, what gets in your way? What can you change to eliminate these obstacles? What can you do as a last resort if your regular system doesn't work, and how can you trigger yourself to engage that last resort?

When you observe yourself in a variety of transaction situations, you'll begin to recognize the ones that wreak havoc with your money management. Practice compensating for these with some sort of workaround. For example, if I'm tempted to grab that gas receipt and run, I ask myself why: Am I freezing? Fine, get in the car, start it, and take a second to put the receipt where it belongs. Was the stupid printer out of paper? Scribble the date, amount, and card used on a scrap of something, even a blank space on another receipt already in my wallet. Am I in a hurry to drive away because some shady character is lurking nearby? Okay, engage the last-resort receipt-handling plan: Get in and go, but keep the receipt or a scrap of paper to make one in my hand until I get to a red light or my destination; then put it where it belongs.

With the Amazon.com purchase problem, I added a new behavior to try to reinforce the one I'm supposed to be doing. Since I couldn't rely on myself to always print out the receipt and put it in the container until the next day I balance my accounts, now I open QuickBooks as I'm finishing the Amazon transaction – right at the point where I'm smiling and thinking, "Cool! I should have that book in about two days!" – and I key in the purchase right then and there.

You, too, can build a set of adaptive processes like these. Instead of chastising yourself for losing receipts or forgetting transactions, just think, "Okay, so this is a glitch for me, but it doesn't make me a bad person. Now how can I solve this problem?" The best solutions anticipate our quirky humanness and help us to work around it.

Choosing the Gathering Place
After you've learned how to herd every last transaction and get it moving in the right direction, you need to have a destination ready to receive and keep those transactions. There's that ancient behavior again: You can get sheep to come home, but once they do, they need a place to stay.

This destination spot can be anything that is large enough to hold receipts of any size, protected from breezes or pets that might steal your captives away again, and convenient enough that you'll actually use it. Mine is a zippered compartment of my wallet; I've trained myself to put receipts there no matter what. When I'm ready to reconcile my accounts, I retrieve all of my receipts from this spot and key them in to QuickBooks. You have dozens of options besides your wallet: a container in your closet, bathroom, or kitchen (wherever you empty your pockets each day); a zippered bag in your car or purse (anything from a lovely leather case to a simple sandwich bag); or a binder clip used like a money clip to keep them all together. Try any idea that appeals to you, and if it doesn't work, try another!

It's not always easy to snare every single transaction, but with my various ways of making sure I get a receipt and herding it into the holding spot, there aren't very many situations that my system can't handle. This should be your goal as well: Improve your system until you become as close to perfect as any modern-day shepherd can be.

Tracking Cash, With or Without Receipts
There is one thing that can throw a wrench into any expense-tracking system quicker than you can say "miscellaneous": the ATM cash advance.

You can be ultra-disciplined about recording check and credit card purchases, collecting all of your receipts to enter into your system, and categorizing your expenditures so you can see where your money is going, but that cash advance receipt can create a big question mark: You know you took $20 out of the bank, but what did you do with it?

If you don't spend much cash and cash advances don't add up to a significant amount for you each month, you can probably skip this section. If you do want to close this gap, here are some improvements you can make to your system to accommodate cash spending:

• Ask for receipts for absolutely everything, even fast food. Keep these receipts with all the others you'll be recording in your system.
• If a receipt is not available for a cash purchase (or if you feel silly asking for one at McDonald's), use the ATM slip from the original cash advance to keep a tally of what you spend it on. If you take out $20, on the back of the ATM slip, jot down where and when you spend that $20.
• If you use money management software, create an account called Cash, similar to the checking, savings, and credit card accounts already in the system. Record your cash spending here and categorize each expense the same as you would in your other accounts.

If you maintain a Cash account record in your money management program, you don't have to maintain an accurate balance for this account if you don't want to. For some people, "cash" is itself enough of an explanation; they don't feel the need to know what that cash was spent on. For others, particularly those trying to stick to a budget, it's imperative to know exactly where every penny goes. Determine your needs based on your unique situation and categorize in only as much detail as you need. Just remember whether you're tracking cash partially or fully and whether or not the balance in your Cash account is accurate when you run reports.

Tip
If you find that you're consistently spending your cash on only one category, such as lunches and snacks, you can stop recording every penny and simply categorize all your future cash advances under Lunch/Snacks.

Recording Every Transaction, Even When You're Rushed
You've unloaded your cart at the grocery store, and now you're impatiently waiting for the customer ahead of you to get out of the way. You want to move forward and check the prices on the screen as the cashier scans in your items, and the bagger needs your cart, but this slowpoke is fumbling with bags, receipts, gloves, and kids, and you're trapped. Minutes later, you're the one finishing your transaction and gathering your things to go. You sure don't want to be The Slowpoke, so you swoop everything into one hand and hurry out of the way. I call this "doing the Next-in-Line Hustle."

Days later, you're pulling your hair out, trying to balance your checkbook and filling in missing transactions from memory. You vow that, from now on, you will write down every purchase as it happens. And you mean it this time. Really.

Every organizing system, no matter how good, can break down when we're rushed. What's the key to making any system work? Actually following it. And what gets in the way of following it? Not taking the time to do it correctly and completely. Your goal is to capture every transaction, so you need a technique that is lightning-fast and fits every situation.

Keeping Track when Paying with a Card
I prefer paying by card instead of by check because I usually get just one receipt that tells me everything I need to know: what I bought, how much I spent, the date, and the account I paid with. Here's how I do the Next-in-Line Hustle, Card Version:

1. Hand over the card or run it through the machine myself.
2. Sign the screen or paper copy.
3. Grab the card, receipt, and ribbon of coupons and stuff them all into the back section of my wallet.
4. Zip up my wallet, grab my bags, and dash.
5. Repeat all week.
6. Take the bulging wallet to my desk, pull out the wad of receipts and check carbons, open QuickBooks, and key in the week's purchases.

Keeping Track when Paying by Check
Even though I prefer using a card, sometimes I have to write a check. I use duplicate checks (the kind with a piece of carbon paper attached), so I know the check number and who it was written to without having to record the transaction in a check register. Here's my Next-in-Line Hustle, Check Version:

1. Pull out the book of checks and tear one off.
2. Fill out the check, separate it from the carbon, and hand it over.
3. Put away the unused checks, my pen, and the check carbon while I wait for the receipt.
4. Pop the receipt into the back section of the wallet with the check carbon.
5. Zip, grab bags, dash.
6. Repeat.
7. QuickBooks.

Did you notice that I don't use a check register?

("Gasp! She doesn't write it all down line by line???") Nope, I don't need to. I get a receipt for every transaction and keep the check carbon for every check I write, so each weekend when I update my QuickBooks records, I enter everything, balance my checking account, and start every Monday knowing just how much of an allowance I have for the week.

Did you also notice that this doesn't sound like an especially neat-looking method? You're right, it's not. By the end of the week, it's a jumble of wrinkly little slips of paper. But nonetheless, it never fails me. (Except when my friend Cindy dumps my wallet on the floor and the receipts slide under her stove. But that was my fault for leaving it unzipped.)

Why does this always work? Because I do the same thing every time. If I deviate from this routine, I get little surprises on my account statement. When my statement shows me that I have less money than I think I have, I'm once again reminded that deviating from my system is more trouble than it's worth.

To do list

• Determine the line items that will be included in your spreadsheet, including all sources of income and all expenses.
• Choose whether to create your spreadsheet on paper or using your computer.
• Set up the rows and columns of your spreadsheet.
• Enter lines for sources of income.
• Carefully choose your expense categories and enter them into your spreadsheet.
• Fill in income and expense data.