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My name is Joshua Sheets, and I am your host. This is a special edition of the show recorded to be here while I am on the road traveling for a couple of weeks here in September. Wanted to make sure I didn't leave you without a show. If this is your first time hearing the Radical Personal Finance podcast, I hope you enjoy the content today, but please check out the archives for the more normal.

Variety that we bring on the show and the more standard format that we tend to stick with today, I'd like to share with you a couple of ideas around the importance of tracking your money. I often am asked, Joshua, where should I start when it comes to financial planning?

And number one place to start, I believe, is generally with what do you want out of life? Where do you want to go? What are you trying to do? And that really is the first place to start. That's not just some idea that sounds namby pamby that you make up.

No, it really is a very important step. What do you want? Because that's what's going to drive the entire financial plan. The clearer you are on that, the easier it is. So if that's step one, though, there is, however, a step about we'll call it one point one and one point one is tracking.

The strength of your financial plan is going to be based upon the accuracy of your data. If I were doing a financial plan for a client, there is a dramatic difference between somebody needing four thousand dollars a month of living expenses versus someone needing four thousand eight hundred dollars a month of living expenses, and you insert whatever number you want.

But there's a dramatic difference in the financial plan because of those numbers in many ways. So it's very important to have accurate data, and it is very difficult for me to conceive of somebody being very financially successful and having an excellent financial plan that doesn't have at least some general idea of what their actual expenditures are.

It's very important. So I'm going to encourage you, if you don't track your money, establish a system that works for you to track your money. Now, this system should, well, can and probably should vary depending on where you're at in your financial stages of life. For example, if you are deeply in debt, just getting started, working your way for the first time through a financial plan, it's probably very important to be very tangible with your expenses so that you really feel them and understand each and every one of them to be very specific while tracking them so that you have each and every one of them spelled out.

And very, very detailed. However, if you are wealthy and have a substantial amount of income and you're living well within your means, it's probably necessary only to have a more general idea of the amounts and the totals for some categories. So a much looser system of tracking may be appropriate.

But it's hard to imagine being able to have success without any system of tracking. So if you've never sat down and designed for yourself a system of tracking your money, consider doing so. And I'll give you a couple of suggestions. Try to be as simple as possible. Simplicity really does count.

I am the king of making things complex. I have really messed this up so many times of going for a complex solution when simple is all that's required. An old-fashioned notebook and a pen and maybe a three by five card carried around in your pocket, a lot of times that can be a much better solution for you.

Then the fanciest app that you can find for your phone. The app gets in the way a lot of times. Now, I'd also suggest to you that you design a system that's appropriate for what you already have. We can talk at some point about ways that you would want to change your tracking system or change your system of accounts.

But just look at what you have and figure out an easy way to track it. So, for example, do you mainly use a checking account? If you mainly use a checking account and use a debit card maybe and some checks and some ATM withdrawals, then probably the best way to track your money would just be by keeping your check register current.

I really believe, and I've worked with some younger clients who've never kept the check register in their life and kind of taught them how to keep a check register. And it's amazing the power of a simple check register. By the way, the reason that it's so powerful is because you can easily put into the check register forward-looking transactions and backward-looking transactions.

It's incredibly powerful. You can't do that very easily with the software solutions. It's a lot easier with the checkbook register. But that may work really well for you. Now, if you're in the habit of using five different credit cards, one of which has the biggest rebate on fuel, so you use that one, and then the other one which gives you a 5% target discount, so you use the Target card and the Home Depot card and all of that, well, now it may be much more challenging for you to use a simple checkbook register.

So now you might want to look for some sort of electronic solution. Electronic solution might be maybe an app like a Mint, Mint.com or a Mint app. They're the most famous, but there are many of them. Just search in your whatever your phone is or just search for some kind of app option and see which one stands out to you.

There's tons of them out there. Now, on the other hand, let's say that you are someone who is very much a user of cash and you always spend cash because you like to either, whether it's part of your budgeting strategy or because you just like carrying cash. Nothing wrong with that.

Well, in this case, maybe the three by five card method might be best and maybe a notebook at home. So you write in the three by five card when you spend the money and every day you just record that in a notebook. At some way, you just need to collect the data.

Now, I'm intentionally, again, trying not to be too prescriptive with what you need to do, but sit down and design for yourself a system. Again, if you were just getting started, those solutions might work well. If you are a wealthy and you just said, "Hey, I've got plenty of money and I'm living within my means," maybe you just put everything on your Amex and at the end of the year, you take the report from your Amex.

They will categorize out the expenses for you automatically. You take a look at those categories of expenses and combine those with your standard household bills. That's fine too. I'm not trying to get into here a budgeting discussion. I view budgeting as different than money tracking. Budgeting is a forward-looking thing.

Money tracking is a backward-looking thing. In one way, money tracking is useless because it doesn't affect forward-looking behavior. Money tracking is just all about having accurate data and budgeting is all about adjusting future decisions. Both are important, but they're important in different ways. People, I think, get those things mixed up a lot of times.

So sit down, consider some detailed tracking method that will work for you. I would encourage you that it's not that much more difficult to make your system very precise than just to make it generalized. If you'll just take what you do and look at it, it's not really that tough to make most systems very precise and the extra degree of precision will allow you to feel much more confident with your financial decisions.

I think that's about all I want to share for today. I'm intentionally trying not to say, "Here's what you must do," but rather just encourage you, set up some kind of system for yourself. Good project for today. And I guess I would add this last thing. Expect your system to change over time.

My system changes continually and I think that's okay. I do that myself. I think that's okay. The reason it changes is because I go through ebbs and flows of my financial life. So, for example, if I'm working very hard at a specific financial goal, at that point in time, I want to be really intense about my tracking and I want to be really proactive with a forward-looking information and a budgeting system.

So, if I'm in financial distress or if the income is tight and the expenses are high, then I'm going to make sure that I'm very carefully watching every dollar. And so, when I've gotten out of debt a couple of times in the past, when I've gotten out of debt, I've switched everything to manual payments.

I don't do anything as automatic payments. I cut everything off of just normal billing and everything becomes manual. And then I take full control back over. And so now every single thing gets a paper check written, everything gets dollars paid, you get the careful checkbook register, careful manual accounting systems, etc.

That can work really great for a time, but then it becomes heavy over time. And so there may be a time I've changed over from that system to more automated systems, where once you have good income coming in, it's more reliable and more predictable, then you can set that up and that's coming in regularly into account, you can set up automatic drafts, and that smooths life out quite a bit.

But it's hard, it's easy to lose control of that. And depending on the complicated nature of the system, it needs to change over time. So I've done it a few different ways. I've made a lot of mistakes in what I'm doing it, and ways I've done it. I guess the key thing I would say is, again, design a system that works for you, and then follow through and try it.

Don't be scared to change it, but track that info, because you need that info to be able to make good decisions. Thanks so much for listening. I hope this was helpful for you. Be back with you with normal content soon. I appreciate your being here. Trying to find your happiness this winter?

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