Managing Your Cash Flow — Step 1

Do you track your spending? Wondering how to start?

Tracking your spending is one of the most effective ways to get control of your money. I’ve been thinking about the ways that you can do this:

  • Keep receipts and record them, either electronically or on paper.
  • Use credit cards and/or debit cards for all purchases, then regularly record the amounts from your online statement.
  • Use an envelope/receipt system: Brainstorm a list of spending categories and write the names on separate envelopes. Or just keep one large envelope for all receipts. File your receipts in the correct envelope and add the amounts spent to keep a running total.

Can you think of other ways to track your spending? I’d be interested to hear about them.

Cash_rounding_receipts
Photo by MyName (Jnestorius (talk)) (Own work) [Public domain], via Wikimedia Commons

We use a combination of receipts and credit card statements and record our monthly spending in a spreadsheet. (We don’t use our debit cards unless we absolutely have to, as our bank charges us a fee for using the card over a certain number of transactions each month). My husband likes to keep track of our grocery spending (somehow that tends to get out of control) as he is often responsible for doing the grocery shopping (I hate it!) He keeps those receipts and records the grocery spending. I will check the credit card statement every few days and record any other purchases.

Regardless of your method for recording your spending, writing it down and adding it up often leads to revelations. (Wow, look at how much we’re spending on ____________!) And that can be the beginning of other conversations about taking control of your spending.

Advice Columns, Finance Style

If I have one secret vice, it’s reading advice columns. And I really enjoy the finances type, where people write in and ask if they can afford to buy a house or if they’re on track for funding their retirement. These make for interesting reading for a number of reasons:

  • I like to compare our own income and expenses with other people. Do we make more? Do we pay more for housing? How do our choices about recreation and other discretionary expenses stack up against others?
  • Related to the first point, I study other people’s expenses to look for ways that I think they could reduce them.
  • I study the posts for constructive ways to coach other people about money and learn what financial advisers are recommending to their clients.

One reliable source of financial planning posts is the Financial Facelift from the Globe and Mail Investing. I always look forward to their articles.

Financial planner ethics

We’ve been talking a lot in class lately about the code of ethics for Certified Financial Planners. When I spotted this CBC article, I thought it was perfect for our discussion.

A Vancouver senior is suing her former financial adviser and his investment firm, claiming her retirement nest egg was decimated largely by excessive commissions her broker earned by purchasing risky investments she didn’t authorize.

There are a lot of issues here, and one I presented to the group was that the person who was responsible for making the investments for her was considered her “financial advisor”. There is always a risk of a conflict of interest, especially when your financial advisor makes commissions on selling you mutual funds. That’s why I’m personally in favour of fee-for-service financial planners, and why, if you hire me to help organize your finances, I won’t be trying to sell you anything other than my services.