Lesson Learned: Track Your Spending

I have learned that it is important to track my spending. Quite a few people swear by Quicken, some by Microsoft Money, some with custom spreadsheets, and some still due so with pen and paper. I have started using Gnu Cash, which has dual advantages of being free and running on Linux.

For a few years in the early 90s I used Quicken. I always knew how much money I had, avoided overdrafts, and even made savings plans. Then in the mid 90s I found myself reinstalling Windows and just didn’t bother to reinstall Quicken. At the time this wasn’t much of a burden. I still lived with my parents and had almost nothing in the way of bills. I didn’t have any credit cards to build up debt and even taking expensive trips to the bookstore I was still able to put aside some money as savings.

I hadn’t realized that I was setting myself up for a trap. I had recently lost one job and started another that didn’t pay nearly as well. The money I was putting in savings dwindled. Then my sister and I moved out of our parent’s house and I found myself with bills that previously didn’t exist. Rent, a car payment, almost weekly visits to the gas station, food, expenses I hadn’t needed to deal with before. Worst of all my savings balance was starting to shrink.

Shortly after moving out I received an offer for a credit card and jumped at the opportunity. The initial credit limit was only about $300 and at first I stayed out of trouble. In fact I would regularly sign into the web portal for the card and pay off charges the same day I made a purchase, or at most within a day or two. Then came the birthday where I decided to splurge. Sure I couldn’t pay it off in one month without cutting into other entertainment expenses, but I wasn’t going over the limit. Then there was the car repair bill. I started carrying a balance, and the world hadn’t ended and suddenly it seemed a natural thing to do. That began the habit of carrying a balance.

My savings continued to dwindle, credit card balance grew every time the limit was raised, and worst of all were the (fortunately rare) overdraft fees when I would lose track of my checking account balance. Despite the occasional overdraft, and the slightly more common close call, I insisted I was fine because I would log in daily to check my balances. Strange how that usually let me catch things before an overdraft, but now always. There would from time to time be a charge that took weeks to show up, and I would have forgotten about it in the meantime.

After one close call last year I decided I needed to start tracking my money again. My sister uses Quicken now, but as I spend most of my time in Linux I decided to give Gnu Cash a try. There are a number of benefits that I have found.

  • I know how much is in my accounts, even what hasn’t made it to the credit union or credit card company yet.
  • I can see at a glance where I am spending my money.
  • I can plan for known future expenses by entering them in advance, and see how much is left over or how much I am short of being able to afford the expense.
  • Better still, no overdraft charges since I started tracking my expenses.

That last one? This month I made a mistake. In a moment of confusion I paid my car insurance bill twice. Previously that could have been a disaster. I was often riding my checking account balance much to close to the edge. By actually tracking my spending I have been able to do a much better job of keeping a buffer for unexpected and unplanned expenses. As a result, despite making an extra large payment towards the the credit cards this month, accidentally paying the car insurance twice is just an inconvenience rather than a disaster.

That makes the few minutes spent keeping Gnu Cash up to date more than worthwhile

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