Something I didn’t do very well in 2010 was managing my family’s personal finances.
That’s a hard admission to make, but they say half the battle is admitting there’s a problem, so there you go.
For years, I was fanatical about tracking our money. For some reason during the past couple of years, that fanaticism waned and, to be honest, that turned out to be a mistake.
While we are far luckier than many people going through the current economic crunch, we still got hit like everyone else has.
Since the mid-1990s, I’ve used computer software to track our finances. For a long time, I used Microsoft Money but switched to Intuit’s Quicken sometime during the past decade. One of the benefits of using these kinds of software is the ability to download transactions from our bank, credit card companies and other financial institutions.
But it’s also been a crutch. Instead of actually reconciling an account, I’ve only been downloading and accepting the transactions. There were times when I went for weeks without really really paying attention to what was going on.
On top of that, despite my earlier obsessive-compulsiveness, I’d never used either software package’s budget tools.
Again, luckily, nothing really horrible happened, but by the end of the year, I realized the “online” balance wasn’t matching the software’s records and when I started going back to figure out what was wrong, found a whole bunch of either missing or duplicated entries.
So, I’m starting over again. From scratch.
It’s turning out to be a painful process having to go back through all the different bills we normally pay and other bills we owe -- yes, like everyone else in America, we have some outstanding bills.
It’s also been a task to figure out what we really do with our money. In addition to our regular groceries, for instance, we also take advantage of the Kershaw County Farmers Market as well as a small produce cooperative. The boys take piano and karate lessons and participate in other programs. And, of course, there are taxes to pay and so on and so on.
I’ve even had to pull out our original mortgage documents to make sure I’ve got the right terms and interest rates.
I could have relied on the original accounting file I was using, but this long, tedious exercise is forcing me to truly examine what we get, what we’ve got and what we spend money on.
The first thing I did was go through the stack of bills and other paperwork sitting in our office.
I then turned to a completely different kind of software: a spreadsheet.
I created tables that included our take home pay, regular monthly bills and expenditures and outstanding bills.
This allowed me, in a very simple format, to see whether or not I could pay some things off immediately, or needed to break them up over time.
As my wife often reminds me: sometimes pencil and paper is best. I just took the electronic equivalent of that.
Then, I painstakingly began re-entering the information into Quicken, starting in pretty much the same order: income; monthly bills, etc.; and the outstanding debts.
As I write this, I’ve got a little ways to go, but I’m pretty close to coming up with a real plan to pay off what needs to be taken care of, ensure we have enough money to cover regular expenses and even set aside a little cash here and there for fun things.
I suspect the big difference for us -- and something I’m just about ready to do -- will be creating a real budget.
In the past, the closest I got was a messy look at income versus regular bills. There was no planning involved; no way to really know -- barring emergencies and other surprises -- in January whether we could afford to do something in August.
We also haven’t been too good at the saving game. Not many Americans are. AccountingToday.com reported in April on a survey conducted by the American Institute of CPAs and Harris Interactive. Fifty-four percent of respondents said they had not been able to save any money in the previous 12 months.
Most of those who did said they did so by cutting expenses -- mostly from dining out, travel and clothing.
Of those who said they didn’t save, most said they were hampered by financial emergencies, unemployment, job loss and credit card debt.
A statistic I couldn’t seem to find was how many Americans actually follow a budget. My goal is to implement a real, honest-to-goodness everything’s in it budget, so that I have an actual plan to follow.
Another trick that just popped into my head is one my wife has been suggesting for some time: using cash to make certain purchases. If we take out the exact amount budgeted for, say, groceries, we know that’s all we can spend when we go to the store. Tip: take a calculator to the store with you; that way, if you have to, you can put something back that goes over the limit.
While I’m, obviously, planning to use my software to the fullest, there is one thing I plan to return to the process -- actually reconciling my accounts. Even “online,” this will be very important to keeping everything accurate.
In any event, that’s my big New Year’s resolution: to keep a firm hand on my family’s finances so that things don’t get out of hand in 2011.