Tracking my spending let me feel some progress. Over the past year I would push down my debt a little with only one little problem. Pretty soon those balances would start to climb back up. Everything said and done at the end of the year if you only looked at my balances you would say I wasn’t any better off. However, a year of tracking my spending in GnuCash (an Free/Open Source alternative to Quicken) did have benefits.
After a year I had a pretty good idea where I was spending money. Looking over the records I could find out how much I spent on gas, food, or the book store. The traditional answer would be to look at this information and build a budget. $X a month for gas, $Y a month for dining out, $Z a month for the book store, and somewhere in the budget a set amount to use for paying off my debts. Check the other blogs out there and you will find a pattern. Plenty of people look at this process and hate it. A set amount a month for gas? You may have noticed but gas prices have an annoying tendency to change without notice. A set amount for the book store? The authors I by don’t come out monthly.
There are ways around this. You might put some money into labeled bins, with the budget not being how much it starts the month at but how much you add a month. Put in $20 only spent $12? Next month add twenty more for a total of $28. Or you might spend $12 then take the leftover $8 and put it towards and extra debt payment. But the variations on that system strike me at this time as too much work. Too much work and I’ll probably find excuses to avoid it. It might be a good system to switch to eventually, but I don’t want to pay off my debts eventually I want to pay them off soon.
So I looked at what I was already doing and kicked it up another level. I was already tracking my spending in GnuCash and in the last few months of 2009 I took it a step forward and was using some of the automatic features to add each months regular expenses shortly before the start of the month. An entry for the rent, phone bill, etc., would each show up and serve as a warning that I’d better leave enough in to cover them. So just after new years I killed each of those automatic entries.
Did I just say I got rid of something useful? You bet I did. Because I decided I was ready to do something even more useful. After deleting each of those automatic entries I took a second look at my known expenses and income. In went an entry for every paycheck of 2010. Next an entry for every rent payment of 2010 was entered. A moment was taken to appreciate the remaining predicted balance at the end of the year — wow, that was more than I expected. Each of the regular bills followed, phone, Internet, car insurance, with each one having every payment for 2010 entered. Finally I included a monthly transfer from checking to savings to make sure I was building up the start of an emergency fund.
The good news, the balance at the end of the year was a positive number. The better news, the balance remaining at the end of the year was more than enough to pay off my two credit cards. So those became the next entries. I started working through month putting in payments to the two cards while making sure to leave money behind for unexpected expenses. The really nice news? If I keep to the plan I can have both cards paid off around October. Extra payments might bring the pay off date sooner, running into problems (yes car engine, I’m looking at you) might push it back a little. But, because I have made sure to leave a little behind each month and include transfers to savings, I should be able to cover unexpected expenses without immediately reaching for plastic.
A little more than a year ago I went back to tracking my spending. This let me keep an eye on where I was and avoid the splurge & panic cycle where I would receive a paycheck, pay the immediate bills, spend a bit on myself and then start worrying about making it to the next paycheck. Now I have a plan. With this plan I know I can not merely make it to the end of the year but that I can have no debt at the end of the year.