When I first graduated from school and started earning a steady income I did what most people do. I ate out for lunch everyday, went for dinner with friends a couple times a week, and spent money just because I had it.
I’m actually happy I did this as it allowed me to enjoy the transition into adulting and hang on to those precious university years.
I then decided I wanted to start travelling but thought how am I going to be able to afford this? This is when I started to become aware of my spending by using an app called Mint to see exactly where my money was going. The Result? I was able to cut down on restaurant and entertainment spending by $200 a month. This adds up to $2,400 per year!
I’ve created a simple guide below to get you started with the same system I used.
PART 1 – YOUR SPENDING SNAPSHOT
Start by setting aside ~20 minutes for the initial setup. I find it much easier to set everything up on a desktop or laptop and then to monitor future spending using the iOS or Android app.
- Setup an account by going to Mint.com
- Select Your Country
- Search for your bank and enter your online banking information to establish a link that pulls your spending transactions and history
Your Mint profile is now setup and you will see all debit, credit or banking transactions. You can take a quick peek at your Overview, but it’s not ready yet to get a full picture of your spending history.
The next step is the only tedious part to this process. You need to go through and correct some of the historical transactions. Start by going to the Transactions tab at the top.
Go through the list and make any adjustments to incorrect transactions. The two most common corrections that need to be made are “UNCATEGORIZED” and “CASH” transactions. For both, click the edit details button after you’ve clicked the transaction line to expand the options. In this section, you’re able to rename the transaction and choose a category, but the more important step here is to check off “Always rename … and categorize as …”. This will ensure you do not have to categorize this in the future.
If you come across any income / expenses that do not align with Mint’s default categories, you can always create a new one of your own by pulling down the category drop down, going to a specific category and clicking “Add / Edit Categories”.
Some of you might be tempted to break down your spending into really specific categories. If this is you, go for it. I recommend keeping it simple to allow for a quick glance of where your money is going. You can always drill down deeper if need be. Remember, the main goal is becoming aware of your spending habits. This will allow you to align your targets with your values and find those extra dollars to move to your savings goals.
Your Spending Snapshot:
Now that you’ve skimmed through and adjusted your categories, you can get a view of your spending over the last few months.
Go to the Trends tab at the top and on the left hand navigation you can choose Spending: By Category. You can select pie or bar chart in the top left corner (I prefer the pie chart) and then the time period under the During drop down.
Play around on here by looking at different graph categories on the left and changing the various settings.
The graph is interactive and allows you to hover over sections to reveal more information.
Is anything you saw surprising?
THE CHALLENGE: Pick one area that you think you can cut down on to free up some funds for your goals (reducing debt, saving for your future, down payment, etc.)
PART 2 – CREATE SPENDING/SAVINGS TARGETS
Now that you have a Mint profile and have reviewed your spending snapshot, it’s time to setup spending/savings targets with the goal of monitoring it monthly. Again, this is for awareness purposes which is the key to successful “budgeting”.
If you haven’t setup your guilt free spending plan yet and don’t have a rough idea of how much spending money you will have after your goals and financial obligations, read my guide to get you started.
Once you have an idea of where your money should be going every month, you can setup targets in Mint to track this progress.
Be sure to focus on reducing your target for the spending area from the Challenge above. This is where you are going to uncover thousands of dollars of potential savings!
Click the Budgets tab at the top to begin. Note that Mint refers to individual targets as “budgets” which I found confusing at first.
- Click Create a Budget and add an Income “budget”. Set it to your monthly after-tax income
- Follow step one and add the various spending/savings targets you may have: Travel, Gas & Fuel, Fast Food, Alcohol and Bars, etc.
- I tend to leave the Start each new month… box unchecked as I like to monitor spending on a monthly basis.
You now have a developed list of spending/savings targets in which you can start to monitor.
PART 3 – AUTOMATICALLY TRACK YOUR SPENDING (Requires 5 minutes per week)
Your Mint profile is now setup and you’ve spent time reviewing your spending history to uncover the one area that you can cut down on to save thousands of dollars per year. How can you monitor your progress in under 5 minutes per week?
I set a recurring reminder in my phone for every Sunday to spend 5 minutes reviewing the past week’s transactions for accuracy. That’s it, you’re done .
This history will build over time and allow you to review the trends that we talked about earlier to get insights into where exactly you’re spending your money.
Go over your targets one month? No problem.
This exercise is meant to be a long term game and create awareness around your spending habits. This awareness translates to conscious spending on what you truly value in life (social experiences, travel, fashion & clothes, etc.).
Once you’ve started to get the hang of using Mint, there are many additional features that can be super valuable. You can establish savings goals within the program, add real estate holdings, track your net worth, etc.
In the future, I’ll be creating a comprehensive guide that includes the features listed above.
Note: There are differing opinions on the safety of using an app such as Mint that accesses your banking information and aggregates it all into one third-party dashboard. I can’t guarantee their security systems, but I use this app all the time. Mint is owned by Intuit which operates major personal finance and accounting software for small businesses. They use high level encryption similar to the big banks. You also can’t initiate any transactions from Mint.com See their security page here.