The Savvy Life

 

 

Guest Post By Miha Mlakar

 

As Melissa wrote in one of her recent post Strive for Financial Leftovers, the golden rule of finance is to spend less than you make. That sounds simple enough, so how come it presents such a big problem to so many people?

To solve any of your problems you first need to identify it. Once you get that right, that's already half a solution, get it wrong, however, and all your efforts will only be making it worse. When it comes to personal finance, most people get it wrong.

You're looking at your bank account at the end of the month and you realize you went way over your budget. What do you think your problem is? Spending too much? And the solution? To spend less?

That's not strictly speaking wrong, but it is misleading. It's not spending too much in general that's your problem, it's spending too much on particular things - things you don't even necessarily need or enjoy - and it's not knowing what those things are. 

If you spend hundreds of dollars on clothes that you only wear once or twice, you shouldn't try to save on food and if half of the food you buy ends up being thrown away, you shouldn't try to save by not going out with your friends as often. That would be like an alcoholic trying to solve his problem by drinking less orange juice. Stupid, right, but most of us do it, in one way or another. When we decide we want to save, we do it without really thinking about our spending habits and without any planning.

To some extent, that's understandable. To get a better insight into our spending habits we would need to track every dollar we spend which would take a lot of our energy and time. Since time is money it's actually perfectly reasonable not to do it. Or at least it use to be.

Pen and paper are a thing of the past. With mobile phones and apps becoming ever smarter and easier to use, finance tracking has become super easy and quick, something anyone can and should do. If you want to to take control of your spending, start by doing a search in the App Store. Whether you own an iPhone, Android phone or any other device, you will find finance tracking apps for it.

So, how do they work? There's some diferences among them, but the basic concept is pretty much the same. After sign up you set up your budgets. Apart from general daily, weekly or monthly budgets, you can also set up specific budgets for your tags, like clothes, food, coffee, or anything you want. After you’re done with that, all you have to do is to keep on adding your expenses as you go which is super quick and easy. Just enter the price, tap the right tag for your purchase and save. All your data is then automatically organized and visualized in beautiful graphs so you can literally see where your money is going, plan your spending and make better informed decisions in the future. 

If you don't know which one to choose, I can recommend you the one I'm using myself. It's called Toshl Finance, a well designed, easy to use, but very powerful little app that’s available for virtually any type of phone there is. It's free to download and use, but it does offer some additional features for a reasonable monthly fee. Apart from the price tag and a great overall quality, what makes it stand out is this cute little monsters that follow you along and actually manage to turn personal finance into something fun. However, there are many good alternatives. It's worth trying out a few and finding the one that suits your needs best.