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Wednesday
Oct162013

Money Habits

Having joined the Money Advice Service I figured that I ought to have a look at how I’m managing my money. In the past I’ve neither been particularly good or bad about it and like a lot of people I’ve spoken to I’d have a rough idea of how much money was in my account but would often loose track of all the incidental expenditures. At the end of the month before pay day taking cash out of the ATM was attempted with crossed fingers!

I’ve been using an application called Toshl to help me track everything. Initially I was using a spreadsheet to log everything but quickly found that despite my best intentions updating it on the fly was difficult and I soon stopped doing it.  Switching to Toshl made things a lot easier.

Having tracked my spending at quite a granular level for the past few months I’ve learnt a few things.

Monitoring predicted spend vs actual spend
One of the most valuable things I’ve been able to do is to try and predict what I’ll spend over the course of the next month in terms of recurring payments (rent, travel etc), “necessitates" (food, the gym etc) and costs of "just living" (music, alcohol, coffee etc). The first time I did this I purposfully didn’t look at any previous spend. I worked out what I thought I spent and over the course of the next month tracked that against my actual spend.

I knew that things like buying records and drinking coffee would feature fairly high up on the list, but I was quite surprised as to how quickly all those impulse £3 bargain basement record finds soon added up! Being able to see this happen allowed me to adjust my habits quickly rather than it being a shock at the end of the month.

Being realistic
I’ve started setting myself a budget that is tracked on a daily and weekly basis. Any money over or under spent from the previous period is rolled into the next. I’ve found having this granular breakdown quite useful and helps me think about the things coming up over the course of the week. I’ve also found that it brought out my competitive nature. Having the simple notion of a green +% next to a day or week's spend encouraged me to not overspend.

I’ve adjusted my budget a few times and it sounds really obvious but being realistic about your budget is important. Initially I was too lenient and I was able to stay within my budget without changing any of my behaviours. I then went to the other extreme of setting a budget that I really couldn’t achieve, with this I found that whilst I considered a lot more what I was spending my money on the times I did exceed my budget I /really/ exceeded it and stopped being as motivated.

Expect the unexpected
In the first month that I was tracking my spending something came up that blew my budget. I figured that really sucked but, hey it was a one off. And then the following month something of similar value also came up. This made me think back over previous months and pretty much each month there was something that came up of a reasonably significant value that was mostly unexpected. I now try and factor these unexpected costs in, and when they don’t occur that’ll be a nice added bonus!

I’ve started looking into the data that I’ve collected in more detail and will probably follow up with another post in the near future with details on that!

References (2)

References allow you to track sources for this article, as well as articles that were written in response to this article.
  • Response
    Response: Namita Chittoria
    mattlucht.com - blog - Money Habits
  • Response
    Response: Goscinski
    mattlucht.com - blog - Money Habits

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