My Money Management Routine
I’m one of those people who looks forward to starting each new year with a clean financial spreadsheet. While I’ve named mine “Maggie’s Budgeting Tool,” it’s not just used for budgeting — a word, I feel, tends to get a bad rap. For some, it seems to elicit feelings of financial restriction or persecution, but I think it needs a rebrand!
I fully believe the combination of budgeting and tracking your finances brings necessary financial awareness that can lead to better money making, spending, and saving habits over time. The key here is that your budgets have to be realistic in order for this exercise to be fruitful. Unsure where to start? Look no further.
If you want to take control of your finances in the new year, walk with me through my daily, monthly, and annual processes to see how short, simple exercises have helped me identify shortcomings and areas of opportunity that have helped me drastically grow wealth without drastic measures.
Tools
Copilot - This is a money tracking app that I created an entire YouTube video about, so I won’t go into great detail here. That video is largely still accurate, but since it was published, Mint, a previously popular budgeting tool, went defunct and Copilot now has a desktop version in addition to its mobile app. If you’re nervous to commit to this paid application, you can try it free for 2 months using my code A6M9T6. (This isn’t sponsored; it’s the referral program every paid user has access to.)
Spreadsheet - I use a unique-to-me spreadsheet that provides both monthly and year-to-date views of my financial position. There are tabs for monthly account balances, income, expenses, and savings, and it also provides insights like my save rate, investment return rate, and overall net worth. Interested in creating your own? You don’t need anything too fancy, and I provide step-by-step instructions for getting started at the end of this article.
Daily
Categorize Transactions
A day rarely goes by without having to make a credit card transaction. There are always bills to pay, groceries to buy, and babies and pets with specific needs. Since I have all of my credit card accounts linked to Copilot, I log in daily to ensure transactions from all my credit cards are categorized correctly. The app does a pretty good job with its “smart categorization,” so oftentimes I just click the ‘Mark as reviewed’ button and move on. (It also allows you to link your Amazon and Venmo accounts to categorize each of those transactions, but I prefer to do those manually.)
💡INSIGHTS GAINED: It’s way too easy to swipe a credit card nowadays, so this practice can reveal if you’ve gotten a little swipe happy and may encourage you to slow down on discretionary spending. Since I’m keeping a constant eye on my transactions and account balances, I’m also able to quickly identify any fishy activity, if it were to happen.
While I use Copilot to categorize my transactions, other budgeting apps likely offer a similar feature. If you already have an app you like, then keep on keeping on! If you currently don’t categorize your transactions and would prefer not to link your accounts to an app, most credit cards allow you categorize your transactions within your online portal.
Monthly
Export Transactions & Review Category Totals
At each month’s end, I export my transactions from Copilot and add them to my financial tool. The spreadsheet is formula driven to subtotal transactions by category, by month, but you could just as easily type in the subtotals from the monthly review screen in Copilot without exporting anything or writing fancy formulas. The daily exercise of categorizing transactions makes this monthly process really pain free.
Review Example
In the restaurants category, we kept our costs pretty low in January. The conditional formatting highlights where our restaurant spending shot up in February, so we scaled back in March. Even though the restaurants category increased dramatically one month, you can see my overall spending (top line) stayed relatively consistent throughout the first quarter.
💡INSIGHTS GAINED: Reviewing your spending by category allows you to easily identify areas where your spending stayed on track and where you may have gone off the rails. This can help you troubleshoot for the next month or adjust your budget for categories where you may have set an unrealistic goal.
This exercise also highlights how small, routine charges add up quickly. Those five, sporadic Amazon purchases didn’t feel impactful in the moment, but when you find your shopping budget in the red by $100 at the end of the month, it has the potential to change your perspective on “little treats” and your long term spending habits.
Every month there will inevitably be a spending anomaly, and the category it affects will likely vary — you may require a new set of tires, take an international vacation, or need a major home repair. Unless you have a crystal ball, there’s no way to build these things into your budget, and that’s for the best. You don’t want to build a routine budget based on non-routine expenses anyway! Because of those anomalies, be sure to examine your overall monthly budget, too. If your overall spending is staying relatively consistent, then you’re probably doing okay (assuming you set realistic budgets.)
Zooming out allows you to see the bigger picture and not dwell too heavily on necessary anomalies; however, if your shopping related spending steadily increases month-over-month because the LTK app is too conveniently placed on your home screen, you’re probably uncovering a bad habit rather than an anomaly.
Update Account Balances
I log the beginning and ending balances for all of my accounts — checking, brokerage, retirement, health savings, etc. — and all related growth, if applicable.
My strategy is to keep only enough money in my checking account to cover my average monthly expenses, plus a little extra. (The extra amount is for emergencies and to avoid accidental overdrafts — somewhere around $1,000.) Everything else gets invested. Since my income is relatively fixed, this practice allows me to dollar cost average into the market. This means I’m investing a similar amount every month to offset higher priced shares when the market is up one month with less expensive share prices when the market is down in others. This method avoids trying to time the market, because that’s really hard.
Writing down account balances and all associated growth also helped me identify (and fix!!) a terrible, six-year-long mistake with my 401(k) investment strategy. Once I realized the issue (underfunding the account and an overly conservative investment approach), I fixed it in 5 minutes (changed my contribution percentage and selected a more aggressive investment approach) and was able to increase my 401(k) by over $56,000 in just two years (thanks to maxing out my contributions and compounding interest.)
You can read more about 401(k)s and the details of that mistake here.
💡INSIGHTS GAINED: Monitoring all account balances in conjunction with my monthly expense review tells me exactly how much I can comfortably invest while still paying off all credit cards in full each month. This ensures I don’t leave any potential growth on the table, I avoid interest payments, and I maintain a solid credit score.
Annually
Review Annual Inflows, Outflows, and Growth
At the end of every year, I take a look at my overall earnings, spending, and growth in conjunction with my husband’s to see how much we made, spent, and put away for retirement over the course of a year. Our primary goal right now is to balance saving for our future while allowing ourselves to enjoy the present. To us that means building some breathing room into our budget to enjoy good food, travel, buy gifts for people we love, donate, and expand our family.
I’ve incorporated several different charts and graphs into my spreadsheet to gain quick insights from areas we review in detail. For example, this pie chart lives on the expenses tab and shows what percentage of my total spending was related to each category.
Here are a couple of things I learned from this chart after a 3 minute review:
It’s no surprise that the biggest spending category was for our home. That aligns with my expectations.
I’d like to improve my ‘Target card payment’ categorization, because that 8.5% needs to be reallocated to actual categories to be more meaningful. I’m betting those dollars related primarily to Home, Baby Gear, and Pets.
I’d like to decrease Shopping spending and increase Entertainment spending in 2024. We tend to do a lot of fun activities around the city at Christmastime, and I want to do more of that throughout the year.
Our grocery spending outpaced our restaurant spending since we cook at home 4-5 nights per week, so we’ll stay the course.
💡INSIGHTS GAINED: After our annual review, we’ll either make adjustments for big life changes, new goals, or prior bad habits, or we’ll stay the course. Reaffirming that you’re on the right track with your earning, spending, and saving goals can be just as insightful as uncovering and rectifying a lackluster investment strategy or poor spending habits.
This review is also your roadmap to creating budgets for the upcoming year. For example, we had a baby in 2023. We’ll need to increase the baby line item in our budget by the amount of her monthly daycare tuition, since that’s a known, future expense. We can safely assume our healthcare costs will also increase thanks to daycare, but since we don’t know when she’ll get sick or how much it will cost, we can’t build it into our budget. We’ll keep an eye on the healthcare line item throughout the year, and after next year’s annual review we’ll have a better idea of expected healthcare costs for 2025.
Start Tracking
Record Total Income, Savings, & Expenses at a Minimum
Create a Google or Excel spreadsheet to record all sources of income by month. (That’s what you see in the first three rows. Numbers are illustrative rather than actual for purposes of this exercise.)
2. Subtract your total monthly expenses from your take home pay to calculate your monthly paycheck savings. (That’s what you see on the green row.) Pro Tip: You can type in the total from all spending categories using Copilot’s Monthly Review feature without any formulas, if spreadsheets aren’t your thing. I do, however, recommend keeping a separate tab for monthly expenses by category to help you better analyze and troubleshoot your spending habits. It’s much more insightful than an overall spending total on its own.
3. Add your payroll savings to the total amount saved from your paycheck. Why? Those amounts are savings, after all. They’re just taken out of your gross paycheck and saved in their proper accounts before the final paycheck hits your bank account — think 401(k) and HSA contributions. (That’s what you see above the blue row.) Here’s the equation to calculate your monthly savings percentage, if you’re feeling fancy: (Total Saved / Take home Income + Payroll Contributions)