A little while ago, I managed to lose my FitBit. I’d worn it for around five years and had developed a habit of achieving at least 10,000 steps each day. My first instinct was to immediately buy another one. Then my rational brain joined in: “Well, Catherine, you’ve established the habit, so you don’t need another FitBit. Now you can get a proper watch that doesn’t annoy people. You’re an adult, you don’t need a thing on your wrist telling you what to do.” I felt liberated.
What happened? Very little. I barely moved over the next three days. My steps weren’t tracked, so there was no point in taking them. They didn’t count. I ordered another FitBit and was soon back to 10,000 steps. The lesson here was: what you measure, you manage. If we’re not tracking our actions, we have an unrealistic idea of what’s actually happening.
It’s exactly the same with our finances. Credit cards and one-click ordering make it too easy to ignore all those small transactions over the month – then suddenly we’re confronted with a hefty bill. To establish healthy financial habits, we need to track what’s happening every day. Here are a couple of suggestions to make it easier.
My budgeting tool of choice is both a web-based app and a statement of fact: You Need a Budget. It combines a friendly interface with four simple rules:
- Give every dollar a job (yes, they’re American) – choose your priorities and ensure every pound is moving you closer to what you really care about.
- Embrace your true expenses – identify those large, less-frequent costs, such as boiler repairs or new spectacles, and break them down into manageable monthly amounts.
- Roll with the punches – accept that stuff happens and that you’ll need to change your budget.
- Age your money – aim to increase the time between earning and spending so that you’re not always catching up with yourself.
I’ve used YNAB for several years and it was a very welcome replacement for a complicated system of spreadsheets. Although it took me a few hours to set everything up, I now spend no more than two minutes each day on adding transactions and checking my budget. With the phone app, I can log my spending in a matter of seconds.
You can use YNAB free for 34 days, then it costs $6.99 per month. It’s accessible from a computer, tablet, or smartphone. There’s lots of support available, including webinars. Alternatively, you can buy the book You Need a Budget by Jesse Mecham, the founder of YNAB, and use his philosophy to develop your own system.
A popular free alternative is Money Dashboard, which is getting a lot of coverage at the moment. It’s a free online financial management service that allows you to view all your accounts in one place. What’s more, you can easily analyse all those transactions to understand where your money is going. The snag is that you need to provide your banking ID and password. This information isn’t stored in Money Dashboard, it’s handled by Yodlee, an account aggregation service used by many financial institutions. Both Money Dashboard and Yodlee offer details on how your data is protected.
Given all the controversy about Facebook over the last year, it won’t surprise you to learn that Money Dashboard generates income by selling your anonymised data. While it’s free, you’re giving them something valuable in return; for many people, that’s a fair exchange. You can find out more on their FAQ page. They also earn revenue from recommending products to you, such as loans and insurance policies.
Whether you need to move more or spend less, using a tracking system will help you feel more in control. Those small positive daily actions build up to significant achievements that can be truly life-changing. As I discovered with my FitBit, once you stop paying attention it doesn’t take long to slip back into bad habits. Sometimes we really do need a gadget telling us what to do.