I have a bit of a weird obsession. Towards the end of the year, I love spending time with my Quicken account. Download, organize, categorize. I like to know where my money went for the year and I like to think about where it might go in the year to come. I have my Quicken filled out from 1993 and every year since then. That is 23 years of knowing where my money went. No wonder I am a financial planner. FYI – for those who do not know, Quicken is a personal financial aggregation tool that allows you to download financial accounts and track spending and Investments. A similar online tool is Mint.com.
Even if finances aren’t your “thing”, I think there are benefits for everyone to do this.
So how have I used this information?
- I can look back at who did a project for us. I may not remember who we hired to paint our house 5 years ago, but if I look in my Quicken data, I know right away.
- I can look back at when we replaced something. If we had a driveway sealed in the past, I certainly won’t remember when, but, I can look it up in my data.
- I track our savings and Investments. Knowing how much you have and where you have it is always important. Seeing how it changes over time is especially motivating (usually).
- Prioritizing spending. I think spending should be done on things that you really enjoy. If I want to make sure we can take a really special trip with the family, I know exactly what I would have to spend less on to make it happen. I like to call this “spending with purpose”.
I have other uses for my data such as seeing how income or spending has changed over time. It is a bit like a financial memory book. The year of the lost job or the year of the extra bonus, the year of lots of vacations (or no vacations). All bring back memories. It is interesting to see how much you earned and how you spent money at 25.
Since not everyone enjoys tracking this information like I do - What is the best way to make it work for you?
- DO NOT make it too complicated. Start with basic categories and don’t over itemize. The more complicated you make it, the more difficult it will be. Create one category for clothes and not a different line of clothes for each member of your family.
- When setting it up, give yourself several hours the first couple times to learn and get your accounts set up. Once you start setting it up, it starts to memorize categories for you, and the process becomes simpler.
- Download and categorize at least monthly. If you wait too long, it becomes more challenging.
Congratulations if you decide to do this. You will have a wealth of knowledge to guide you in future decisions. And you might just find you become a bit obsessed too.