Reading Time: 10 minutes
Action Time: 45 minutes (10 min set up, 30 min categorizing, 5 min pondering)
I found tracking my spending to be one of the most impactful things I have done on my financial journey for two reasons:
- I could easily see what things (ex: Restaurants) the majority of my paycheck was being spent on — much easier than hoping I followed my budget this month
- I knew exactly how much money I had left over to invest each month
This post will focus on point #1: getting a quick and easy overview about where your hard-earned money is actually going. Luckily there are some brilliant people out there developing apps to accomplish this very goal. My personal favorite is: Mint.
What is Mint?
Mint is a free app/website which links to your debit/credit card and assigns a category(Food/Dining, Bills, etc.) to each purchase you make. Mint has some other cool features for budgeting, credit score, etc., but we will only worry about the spending for now.
What if I don’t want to link my debit/credit card information because I’m afraid of cyber criminals stealing my information?
You can learn more about Mint’s security on their website. If your still not convinced, you could make an excel spreadsheet and manually enter purchases, but realistically no one has time for that, and therefore I will proceed assuming you will be using Mint.
What if I prefer cash instead of credit/debit cards?
I will detail how to deal with occasional cash purchases in Mint below. However, if you use cash for the majority of your purchases then tracking your spending becomes a much more manual process. This should not discourage you or prevent you from tracking expenses, just be aware that you may have to invest a bit more time because Mint will not be able to automatically classify the purchases for you.
How do I sign up? (Time Estimate: 10 minutes)
Step 1– go to Mint’s website and click “Sign Up” in the top right hand corner of the homepage.
Step 2 – create a username and password
Step 3 – link your bank accounts, debit cards and credit cards. To do this, search for your bank/debit/credit card provider. If you have multiple accounts/cards that you buy things with, then you will need to repeat Step 3 and 4 accordingly.
Step 4 – enter the login information for your bank/credit/debit card. Yes those same login credentials you use to check your credit card statement every Monday morning.
Pro Tip: Collecting the login information for all of your accounts beforehand will make this step much quicker
Track and Categorize (Time Estimate: 30 minutes)
This is where some time and effort are required. After you link your accounts, Mint will assign a category to each purchase you have made with those accounts. 90% of the time this categorization is pretty accurate,however there are times when the assigned category is wrong.
For example, if you open a bar tab at a place called The Flower Shop, Mint may classify this as “Gifts” instead of “Alcohol & Bars”. At the end of the day we want an accurate picture of our spending. So let’s not lie to ourselves and pretend we bought $100 worth of flowers for Mother’s Day, when in reality the money was spent on beers and vodka sodas.
Manually classifying your purchases is quite easy and can also be done in the mobile app. I found the mobile app to be quite intuitive. Therefore,I will focus on how to manually classify via the website. However, the concepts I introduce can be applied with either interface.
After clicking on the “Transactions” link in the main ribbon of the website you will see a list of your purchases sorted by date:
For each transaction, you can click on the category (Travel,Rental Car & Taxi, Education, etc.) and change Mint’s assignment. For example, if I want to change Tab Hostal Coco from “Travel” to “Hotel”, I would simply click on where it says“Travel” and use the drop-down list to change it to “Hotel”.
Mint has a preset list of categories to choose from and also gives you the ability to Add To/Edit their preset list.
What if I go out to dinner with some friends and put the entire tab on my credit card? Mint will think I had a $300 meal, but in reality all of my friends paid me cash/venmoed, so I actually only spent $40.
Mint has a useful “Split” feature for these types of situations.
Simply click “EDIT DETAILS”, then the “split” symbol and then enter the breakdown of the transaction. In the example below, we will assume that the $31.36 hotel room (gotta love Ecuador) was split between myself and one other person.
As you can see above, I chose to put the one half of the transaction into “Hotel” and the other half into “Hide from Budgets & Trends”. This way when I analyze my spending later, I won’t have inflated transactions misrepresenting the amount of money which actually left my pocket.
For some reason you are not able to split Pending Transactions. So I usually hold off on categorizing them until they are no longer Pending.
If you link your debit card, then every time you take out cash Mint will create a transaction with the label“Cash/ATM”. I try my best to recall what I spent that cash on and then split the transaction accordingly.
When I simply cannot remember where I spent the cash, I choose “Restaurants” or “Alcohol & Bars”. When I analyze my monthly spending, my “Restaurants” and “Alcohol & Bars” categories may be a bit inflated. However, seeing a larger number in these categories is good, as it helps me curb my future spending on bites and booze.
Pro Tip: Put your “unknown cash amounts” into whatever category you are ultimately trying to spend less on.
Venmo Transactions (The Hidden Assassin)
This is a very important point for me personally as I use Venmo quite often. If you keep a zero balance in your Venmo account, then Venmo transactions will be paid via your linked banked account and appear in Mint as a transaction with “Venmo” as the description. From here you can simply assign the correct category to each “Venmo” transaction.
If you do not have a zero balance in your Venmo account, then none of your Venmo transactions will flow through Mint, and it will be much more difficult to track these purchases.
Pro Tip: Always keep a zero balance on Venmo. Use your payment history in the Venmo app to help you classify Venmo transactions in Mint.
Mint offers a large list of categories and they can get quite granular. While this granularity is great, it can also make classifying transactions quite tedious and time consuming. I suggest only using the granularity where necessary.
For example, I find it useful to split my “Food/Dining” expenses between: “Alcohol & Bars”, “Groceries”, “Restaurants”, etc. Conversely, I do not find it necessary classify my “Entertainment” expenses at a deeper granularity:
Now that you know how to classify and split your transactions, it is time to take action! If you are doing this for the first time, I would recommend reviewing and classifying your transactions for the last 3 months (about 30 minutes of effort). This will give you a good idea of how you normally spend your money.
Ponder (Time Estimate: 5 minutes)
The hard work is done, now for some “fun”. Click on the “Trends” link in the main ribbon of Mint’s website and brace yourself…
As you can see, most of my money this month was spent on “Home”, aka rent. Gotta love New York City’s housing market right?
Mint allows you to dive deeper into each category and the types of analysis you can do because honestly it is pretty easy to navigate the “Trends” section. Personally, I focus my attention on the following categories:
These categories are the easiest to control on a day-to-day basis. I remember my stomach dropping when I saw how much I spent on “Restaurants” and “Alcohol & Bars” during my first few months in New York City.
However, since I was tracking my spending, I was also able to monitor how small lifestyle changes (like CitiBiking everywhere) impacted my bank account. In a city like New York with constant temptations/opportunities, this positive reinforcement is HUGE!
Maintain Good Habits! (Time Estimate: 5 minutes per week)
Congrats! You have set up your Mint account, classified transactions and you now have an overall idea of where your money is going. This knowledge is powerful, don’t underestimate it! As you may have noticed, reviewing transactions for multiple months can take some time and it can be very difficult to remember certain purchases…
Pro Tip: Every Sunday spend 5-10 minutes reviewing and classifying your transactions from the prior week. It will be much easier when the purchases are fresh in your head. And if you had a rough weekend, it will also help you be a bit more conservative with your money in the coming week.