Simpler Monthly Accounting
Buck of Buck Inspire asked if I was an accountant after reading my June Cash Flow post. The answer is no, I am not an accountant and these last 3 months were the only time I kept careful account of the monthly cash flow. However, I found that it was not that difficult and it didn’t take that much time actually.
The key to a simple monthly accounting is to have minimal active accounts. We have many accounts, but most of them are pretty static. Here are the list of our active accounts starting from the most active to least.
- checking account. All the regular income and automatic payments go through this account.
- one credit card. We have only one credit card and we minimize the usage as much as we can. A the end of the month, I check the credit card website and it’s not too difficult to categorize each entry.
- PayPal. This account is only for blog related finance.
- investment account. I check dividend income at the end of the month. I don’t trade very often so this account is usually not complicated.
- saving account. I check interest income at the end of the month. If I have extra money in the checking I also transfer most of it here.
Most of the work was already done by the banks, PayPal, and the brokerage. All I had to do was to enter each income and expenditure into the correct category on my cash flow spreadsheet. I also have all these accounts hooked up to Personal Capital and kept track of the transactions there. For now, I like making each entry on the cash flow spreadsheet by hand. It makes the expenditure more real to me. It’s much easier to categorize them in Personal Capital, but I feel more disconnected to the spending. Does that make sense?
Anyway, I know many savvy personal finance bloggers believe in maximizing credit card rewards, but it’s not for us. If I spread out my expenditures to 5 credit cards accounts, it would be more difficult for me to track and I probably would quit tracking the cash flow. I’m sure we would spend more money as well.
What about you? How do you keep track of your monthly cash flow?
* I slide over our cash allowance a little bit in this post as LLF pointed out in one comment below. The cash allowance is budgeted to $100/person every week and it’s for groceries, eating out, clothes, and other discretionary spending. You can read a bit more about our cash system on this post – Cash or Credit. If you look at June cash flow, you’ll see a big $700 allocated to cash allowance. I don’t know where every dollars goes, but I know it’s in the discretionary spending category and I know we didn’t go over budget. So we did cheat a bit by not keeping track of every allowance dollars spent. 😉
If you need some help keeping track of your finances, you should try using Personal Capital to manage your budget. It’s a great free budgeting tool. You can keep track of your income, expenses, and net worth, all in one place. Personal Capital is geared for investors and have many great tools. See my review of Personal Capital and how they helped me reduce what I’m paying in investment fees.