How to Track your Personal Finances

As the saying goes: What gets measured gets improved; this is especially true for our finances.

Just like we track our weight on a regular basis, the same should also be done for our finances.

But the question is – what is it that we should be tracking, and how often should we do it?

The best way to track your personal finances is by having a monthly personal finance meeting.

A monthly finance meeting is a meeting you have monthly to review your personal finances.

During this meeting, you review your net worth, the month’s expenditure, and savings rate.

The purpose of this meeting is to determine whether you are closer to your financial goals.

In this post, I start by talking about the benefits of having a monthly personal finance meeting.

I explain how to calculate your net worth, your monthly expenditure, and your savings rate.

Finally, I talk about the benefits of doing your monthly finance meeting with a partner/buddy.

Why have a Monthly Finance Meeting?

You may be thinking: why should I track my finances or even have a monthly finance meeting?

There are so many advantages to tracking your finances, especially if you are in a relationship:

• Happier Couples: By discussing finances with your partner you’re less likely to argue about it.
• What gets measured, gets improved: By tracking, you will see ways to improve your finances.
• Tracking is fun: By changing your mindset, you may find that you enjoy tracking your finances.
• Saving money: Through tracking, you may find ways to cut down on unnecessary expenditure.

These are just some reasons why you should track your finances and their positive benefits.

If you (and your partner) align your finances with your goals, you’ll be able to get their faster.

If you see the benefits, then go ahead and set a date for your first monthly finance meeting.

The best time is ideally the last day of a month, where you can review before the next month.

Tracking your Net Worth

The first thing that you track as part of your monthly finance meeting is your ‘net worth’.

You may have come across this term if you have ever searched for a famous person online.

For example: Elon Musk – net worth: $218.1 billion or Jeff Bezos – net worth: $132.8 billion.

What this means is that this is how much they are ‘financially worth’ at that moment in time.

So how is this calculated and how does it apply to us? To calculate your net worth, you add up all your ‘assets’ and ‘liabilities’ and subtract them. The amount that is left is your net worth.

In simple terms, you subtract all that you ‘owe’ from all that you ‘own’ to get your net worth.

If you are in a relationship, you can calculate your net worth as a couple instead of individuals.

If this sounds complicated, I promise it is not; I wrote an article explaining more on net worth.  

So every month, the first thing you do is add up your assets and liabilities, and subtract them.

Ideally, you want your net worth increasing every month, which may not always be possible.

Tracking your Expenditure

The second thing that you measure in your monthly finance meeting is your ‘expenditure’.

Your expenditure is a measure of how much you money you spent by the end of that month.

More importantly, you want to be able to see everything that you spent that money on.

There’s a great tool called Money Dashboard (in the UK) that helps you track your spendings.

It works by simply creating an account and connecting all of your bank accounts in one place.

As you can see in the image, it organises all your spendings into multiple different categories.

You can exactly see how much money was spent on your bills, food, transport, eating out, etc.

So every month, you open up Money Dashboard and take a look at your month’s outgoings.

Compare this with the previous month’s expenditure: Does anything stand out?

The goal is to use this tool to see if you are on track or any ways in which you can reduce your expenditure.

Tracking your Savings Rate

The third thing to track during your monthly finance meeting is your ‘savings rate’.

Your savings rate is a percentage of how much you saved out of how much you earned that month.

For example, let’s say you earned £2000 during the month and you spent £1000 that month.

That means that your savings rate is 50% i.e. you spent half your income and saved the rest.

So why is this important? Why does tracking your savings rate each month even really matter?

It matters because your savings rate determines how long you need to work until you retire!

I wrote an article talking more about savings rates and the principles behind this calculation.

Let’s say you have a savings rate of 50% – that means that you can roughly retire in 17 years!

In your monthly finance meeting, determine what your savings rate is using this spreadsheet.

If your savings rate is low, think about how to improve it if your goal is to retire much sooner.

Questions to Ask Yourself

After you have tracked these three numbers, you then want to reflect and discuss the results.

After viewing your numbers for the month, you want to ask yourself the following questions:

• What went well/not so well this month?
• What did I spend a lot of money on this month?
• What surprised me this month: either positively or negatively?
• What really added value to my life this month?
• What could I spend more or less on?
• Am I happy with the direction I am going?

These questions are to inspire discussion and figure out what can be improved every month.

If you get 1% better each month, by the end of the year you would have made huge progress!

Have a Monthly Finance Meeting Buddy

It is better to do your finance meeting with someone, because they keep you accountable!

If you are in a couple, do the meeting every month with your partner and get them on board.

If you’re not a couple, don’t use that as an excuse; get your sibling or friend to be your buddy.

Make it fun; go to a café/restaurant and invite them for a meal as you discuss your finances.

More importantly, commit to start tracking your personal finances each and every month!

Do you track your finances? Do you have a monthly finance meeting? Share in the comments!

If you want to learn more about net worth, check out my post on how to track your net worth.

If you want to track your expenditure, check out my post:  Cashflow: How to Buy your Freedom.

If you learn more about savings rate, check out my post on how to track your retirement age.

If you have any suggestions for future blog post topics, please share in the comments below!