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First step to getting your personal finances right

A wise finance professor, who used to teach me during my management degree, used to say that the first step to your managing personal finance is to know where and how much you are spending. And he had warned us that the task may seem very easy, but actually keeping track of your finances every day for months and years is not a joke. A few months back, I started keeping track of my finances. Why? Because every month end me and my wife use to sit down and wonder where our money vanished. We seem to be making enough, but periodically the pot seemed to dry up by the end of the month.

We started off by filling paper notes and note books with our expenses. Then moved on to spreadsheets. It was tough but I still managed to religiously update my finances to an spreadsheet at the end of the day. I have a poor memory (for the nerdy: low RAM not ROM!) and if I do not note down my expenses at the end of the day, there is a pretty good chance that I would have forgotten about it by the next day. So, I had a spreadsheet on Google docs, which was accessible from my laptop, home PC and my phone. After 4 weeks of note taking, I finally knew where, when and how much I was spending.

A lot of people I know equate expense tracking to expense cut downs. I track expenses just to answer the question – “I earned x this month. Why am I on the 20th of the month without any left?”. If I had an infinite income, I would not have bothered with this, but till then…The beauty of expense tracking is that you automatically identify where you are spending a lot of money and then cut down on it without any effort. It just happens…

I did expense tracking for another 2 weeks, missed a few days and then lost interest. It was just not practical to remember to open up an excel spreadsheet every single day. Fast forward a few months. I discovered Mint!

Mint.com is one of the best websites for people who have the remote desire to someday know/master your personal finance. Setting up an account is easy and free. Just enter your basic information, provide mint with login credentials for all your financial accounts and that’s it. What Mint does is simple. It aggregates all your accounts into a single view. Spent $10 on coffee at Dunkin Donuts on Visa and $500 on Delta on Amex. Fret not, they all come together into a single view on Mint. Mint automatically organizes and categorizes the  transactions for you. Comparing it to my earlier expense tracking method, the only thing that I need to do with Mint it to validate. Note taking, organizing, categorizing is automatically done.

I make it a point to log into to Mint atleast once in few days and validate the transactions. Mint automatically ports your expenses into reports and easy to understand displays. It just makes me want to come back. I have started using their Budget and Goals features, and I am loving that too.

Conclusion: I will keep it simple…Mint is a must try for every one!

Note: The flipside to Mint is that it only works with US banks presently.

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