As part of our launch week, GoodMoneyAdvice is throwing out a challenge to our new readers. With the holiday season just weeks away, spending for many Americans gets out of control. In 2018, consumer spending exceeded $1.1 Trillion dollars, yes TRILLION. That was up five percent from the prior year. Nearly $128 billion came from online sales, which jumped almost 20 percent year over year.
While we strive to live up to our name of providing good money advice, we also will be promoting good money habits, and one essential habit is to track your spending. We encourage you to start the month of November off the right way to avoid any unexpected pitfalls which causes you to overspend or, worse, not be able to make your financial commitments.
Over the next 30 days, track all of your spending. Every day, keep tabs on what you spend the way that works for you. Some prefer a pen and paper, while others will use apps such as Mint. You may want to go old school and skip using all plastic (debit and credit cards) and operate out of the envelope method. Bottom line – know where every single dollar goes for an entire month. Think it’s easy? You likely have never tracked your finances before.
Make an honest budget, listing all your fixed expenses first (i.e mortgage, car payment, student loans, utility bills, etc), and then list variable expenses next (groceries, auto maintenance, entertainment, holiday gifts, etc). It’s best to budget slightly higher amounts than what you anticipate spending, and come in below budget.
The key to any successful budget is to stick to it, and be consistent. You will find that by tracking your spending, you will get a true sense of where your money is really going. If you find yourself using your credit cards to be a band-aid until payday, this will assist you to getting to the root cause of where your lifestyle may be misaligned. If you find that one category you over-budgeted (likely) then it’s a guarantee you under-budgeted in another area or two. It’s often not until we list every single purchase we make that we see how much we truly spend on our lifestyle.
If you want to utilize a few free budgeting applications for this challenge, below are our picks for the four best options. As a reminder, you don’t need a fancy app to budget. A new spreadsheet, a pen and paper, or a blank Word document can do the job just as well.
Five Best Free Budgeting Tools (Updated September 2019)
Clarity Money (powered by Marcus)
Over 2 million people have jumped on the Clarity Money train, and with good reason. You download the app (or sign-up online), link your bank accounts and credit cards, and have complete control of your personal finance future from there. If you no longer want your Spotify subscription, you can cancel through the app. If you want to check your credit score after paying down your debt a few months into using Clarity Money, you can do that too.
Marcus (powered by Goldman Sachs) acquired Clarity Money in the Spring of 2018, and while the features of the app that we have grown to love have not changed, the name and rebranding eventually will.
How Clarity Money Works
You Need A Budget (YNAB)
YNAB is the easiest app to learn and understand, and feels like it is essentially built for those just starting to budget. YNAB works on both Mac and Windows, and offer apps that sync data to your desktop (for a fee).
One of the most popular in this category, Mint has been around for over a decade. The biggest drawback of the app besides the countless ads you will see is the fact you can’t essentially budget to the penny as you can with other options on the market.
One of the most popular new apps on the market, Personal Capital let’s you seamlessly import transactions from all of your accounts, and then create various charges to reflect your spending and savings, with options to compare your results month over month.
Acorns takes budgeting a step further for you. This app tracks your debit and credit card purchases, and then rounds them up to the nearest dollar. With that spare change, it invests the difference for you in exchange traded funds that you can select. Companies taking your loose change and moving it places isn’t new. Bank of America was the first major company nearly a decade ago to round up your daily transactions in your checking account, and automatically would move the loose change to your savings account.
Example: You spend $24.54 at the movies for you and your significant other. You will see $25.00 as the purchase, with 0.46 going towards your ETF. Now Acorns isn’t technically free, unless you are a college student. It does cost $1 a month to maintain until your portfolio hits $5,000. Once you eclipse that balance, the fee jumps to .25 percent of your balance.