Having (and sticking to) a budget is the first step to being in control of your finances. Some people use Excel spreadsheets, others use accounting applications. We use a combination of both. In today’s post, we have a look at
- What accounting application/s to consider (we share some pros/cons of those we’ve used to date); and
- Creating a Budget
- Track your spending
What accounting application/s to consider
For several years, when we lived in Sydney, we used Reckon Personal Plus to balance our credit card statements and track our personal finances. It was easy to use, and it allowed us to track multiple accounts, including those in foreign currencies. For our three month trip in 2012, we used a smartphone app called TripBoss, which allowed us to set a budget and track our spending in multiple currencies very easily on our phones.
The one thing that neither Reckon Personal Plus nor TripBoss could do was allow the data to be synced between devices or operating systems. So, when our annual subscription for Reckon Personal Plus came up for renewal, I looked for a solution that better met our needs, shortlisting our options with the help of these websites:
Based on my review, we changed over to MoneyWiz, an application that can be used on all devices and all operating systems. You can enter data on your smartphone, and it syncs automatically (when you have internet access) to your other devices, including any Windows-based ones. It took a bit of time figuring out and taking advantage of all the features (for example, it provides a variety of reports), but the support we received from their help desk when we had questions was always great.
When we set up our limited liability company in New Zealand in November 2017, we had to change applications once more, as MoneyWiz is a personal finance application and not geared up for the needs of a small business. We now use Reckon Accounts Home and Office for both our personal and business finances (including processing multi-currency transactions and keeping track of GST liabilities and shareholder loans/repayments).
Why not use MYOB or Xero you may ask? The key reasons were cost (both are significantly more expensive than Reckon Accounts Home and Business) and the fact that both were designed to be (pure) business accounting applications. Managing our personal finances in MYOB or Xero would have been significantly more cumbersome (and using separate applications for our personal and business needs would have made no sense).
Below is how to use an accounting system to budget for and track your spending.
Creating a budget
Create budget categories and determine your daily budget. We don’t just determine one daily amount but break it down into budget/expense categories, which can easily be customized in accounting software (in alphabetical order):
- Accommodation and Utilities (including short-term rental accommodation, laundry, phone/internet)
- Bank fees and Government charges
- Clothing and Other Purchases
- Gifts and Donations (including tips)
- Groceries and Dining
- Health (including Medical, Dental, Physio and other treatments)
- Hygiene (including Haircuts, Manicures, Pedicures, Facials)
- Leisure (including Hobbies and Entertainment)
- Transport and Travel.
Given we change countries frequently, we do this for each country/currency, determining our daily budget per category with the help of these websites:
Tracking your spending
Record your transactions. This is the hard part as it requires discipline: Don’t just record your transactions occasionally / when you remember. Rubbish in = rubbish out (or in this case incomplete data = incomplete visibility of what you spend your hard-earned money on). So keep your receipts and log them into your accounting system on a daily basis.
We scan all our receipts/invoices using the Office Lens Smartphone app and then enter the transactions into our accounting system. Every transaction must fit into one of the expense categories mentioned above. In addition, we may allocate a tag to enable us to do further analysis (for example, we add a country tag to work out our daily costs per country).
If you use debit and/or credit cards it is important to keep track of these transactions too. If you wonder what debit/credit card to travel with find out more in our guide on debit/credit cards for overseas travel.
At the end of the month, when we receive our bank account and credit card statements, we check and balance all our accounts, and only pay our credit cards (in full) once we’ve done it. This way, we take advantage of the benefits of credit cards without getting into debt. We also use our accounting software to maintain visibility of our assets and net worth.
Feature photo by Sharon McCutcheon on Unsplash