Your account balance can only tell you so much about your financial situation. Your current balance is only a snapshot in time, it doesn’t give you a clear picture of where your money is going and what expenses you have in your future.
At times, especially if you’re trying to avoid overdraft charges or see if money has been deposited, it can be useful, but in trying to manage your finances, it’s not that helpful.
What does your current balance tell you about last month’s spending? Not a lot.
What does your current balance tell you about your planned expenses for this month? Nothing, except that you hopefully have the money currently in your account.
Planning your finances using just your balance doesn’t give you the detail needed to make a difference. You’ll see the peaks of your income and the valleys of your expenses slowly being taken out. You’ll see long flat patches where you’re trying to make it to payday, but you won’t see anything that will help when it comes to changing your behavior or your budget.
What should you be looking at?
You should be tracking exactly where your money has gone, where you’re planning on it going and where it actually goes in the future. The ghosts of finance past, present and future. Depending on your situation, they can be very jolly or rather dreary.
Take a peek at your past expenses. Whether you’re printing off your transactions and going through them, looking at the expenses you need to pay each month and using that as a starting point, or if you’re organizing everything down to the last penny, find out what you need to know to make decisions about your spending going forward.
Plan where your money should be going. This is the beginning of a process that can be quick or long depending on where you are. In order to plan where your money is going, you need to prioritize your different options. Saving comes first, then required expenses, then discretionary spending. Remember to include periodic expenses in the required category. Just because the bill isn’t due for three months, doesn’t mean you don’t need to budget for it before then.
Once you have a plan, it’s time to start tracking every expense. This is what will replace checking your account balance. Each time you spend money, put it into your budget so you know where you’re at in your plan. Are you spending too much money in one area? Did you not plan for something? Do you need to adjust something before you get paid again?
As you track your expenses, you’ll see exactly where you’re spending your money. Keeping to your budget can be as much a part of changing behavior as it is being aware of your finances.
Tired of habitually checking your account balance? Then get started planning and tracking your expenses. Mvelopes makes the entire process simple as you add your bank accounts and have your transactions imported regularly. You’ll know where you’re at in detail at anytime at home or on the go.
Mvelopes is an award-winning budget app that helps you set up a digital envelope budget so you can manage all your expenses, track your transactions and achieve your financial goals. Get started today with a free trial.