Kid’s Toys – Tricks To Save Money

I have a 14 month old toddler at home. He is the best thing that could have happened to us. At this age, the kid’s minds are like a sponge, soaking up huge amounts of information from their environment. They are absorbing everything around them, effortlessly, and indiscriminately. At this age the kids need a lot of mental stimulation. Toys are one of the best ways to provide mental stimulation for kids.

I don’t know about others but I have noticed that my son gets easily bored with toys. He needs new toys every few days to keep his ever curious mind busy. However, toys can be expensive and I have seen people spend hundreds of dollars in buying toys. Their living rooms are cluttered with toys. But, it does not have to be that way.

Here are some idea I have used to buy toys inexpensively and also minimize clutter.

Buy Used Toys

V

We’ve spent at least a few hundred dollars on toys until now. We used to buy new toys always until one day my wife found some great used toys while browsing on Facebook Market place. The first used toy we bought was a Vtech walker. This walker would typically cost you about $40.00 if you bought it new. We were able to get a hardly used one in great condition for $8.00. Like many others we wanted to provide the best toys for our kid and were initially skeptical about buying a used toy. Once we got past the stigma of buying a used toy and bought our first toy through Facebook Market place, we now only buy used toys. By buying used toys, not only are you able to save a lot of money, but you are able to provide more options for your kids by giving them more toys. In some instances we have been able to sell the toys back through Facebook marketplace for a few dollars more than what we had initially bought for.

There are several other online marketplaces such as Offer Up and Craigslist where you can buy used toys as well.

When you buy a used toy, just make sure you thoroughly clean it and disinfect it with an alcohol wipe prior to letting your kid play with it.

Exchange Toys

Several of our friends have kids who are around the same age as our son.We swap toys with those friends every few weeks. This way you minimize clutter at home since you don’t have to buy all the toys, but you also keep it interesting for your kids since they get to play with new toys every few weeks.

Kids have a short attention spans. So, even if you are swapping back the same toy a few weeks later, it looks new to them and they are more interested in playing with those new toys rather than playing with the toys they see everyday. This keeps it interesting for the kids. Personally, my kid is very excited to play with his new toys every time we do a toy swap. We typically do a toy swap once a month with our friends. This concept is similar to the one provided by services such as ToyBoxMonthly with the exception of the subscription fees. You can do the same with other kids stuff such as kids books, movies etc.

Reach Out to Family, Friends and Colleagues

I was talking to one of my colleagues and we were discussing kids and toys. During my conversation I had mentioned to him about how my son gets easily bored with toys and how he quickly outgrows them and that I needed to buy new toys to keep him entertained. When he heard that, he remembered that he had some toys in the basement that he needed to get rid of and offered to give them to me if I needed it. That is when I realized that there are several people who you might know who have kids whose toys might be sitting in their basement collecting dust and cluttering it up. You can reach out to them to see if they have toys that they are trying to get rid of. This would be a great way to save some money on toys while providing more option for your kids.

Using the above techniques not only will you be able to save a lot of money on toys but you will also be able to provide more toys to your kids to stimulate their ever curious minds. You can also minimize the clutter in your home by selling toys you no longer use on online marketplaces such as Facebook marketplace and OfferUp and use that money in order to buy other toys. This way you are just putting the money you got from selling your old toys in buying new toys instead of putting additional money in buying toys.

I hope you found this article helpful. These are simple changes you can make in your life to save a few extra bucks.

Feel free to share other ideas you might have used in saving money on kid’s stuff (toys, clothes, books etc.) in the comments section below.

New Year Resolutions To Improve Your Finances

January is the time of the year to take a step back and assess how you did last year and what you can differently to improve your financial situation this year. Here are some ideas on what to consider when you are deciding on resolutions for this year to improve your financial situation and how to go about successfully implementing them.

1. Track Your Expenses

The first and foremost step towards improving your financial situation is to understand your finances. The biggest element of understanding your finances is tracking your expenses. A good resolution to consider for this year would be to consistently track your expenses each month. You can do this by using a simple tool such as an excel sheet or google docs. Alternatively you can consider one of these popular apps to track your expenses.

• Mint
• Quicken
• Personal Capital
• Clarity Money
• Wally
• YNAB
• Mvelopes

I have personally been tracking my expense consistently every months since 2010. It was initially tough, however it has become a habit now. Tracking your expenses helps you identify areas where you tend to spend more. You can then try to focus efforts on reducing expenses in those areas where you tend to spend more.

2. Eliminate and/or Consolidate Your Credit Card Debt

The average credit card debt per American household currently stands at $5,700 and 41.2% of all households carry some sort of credit card debt according to a report by ValuePenguin. Credit card debt is by far one of the most expensive debts to carry. The average APR across all credit cards is about 17.47 %.

The ideal situation would be for you to take a resolution to pay off all your credit card debt this year if you can afford to. This would be a huge load off your shoulders. But, I do acknowledge the fact that it’s easier said than done considering other financial obligations you may have. If you cannot pay off all your credit card debt, at least try consolidating your credit card debt using these cheaper alternatives.

Low-interest balance transfers – You could apply for a new credit card which offer low interest introductory balance transfer. There are also several cards that would provide 0% APR on balance transfers up to 1 year. You will then have up to 1 year to pay off all your debt interest free.

Home equity line of credit – If you have enough equity built into your house, you could consider getting a home equity line of credit to pay off all your credit card debts. The average rate for home equity line of credit as of December, 2018 was about 4.82% which is significantly lower than the rate for credit card debt.

Personal loans –You could apply for a low interest personal loan to consolidate your credit card debt. Peer-to-Peer lending services such as Prosper, Upstart, Lending Club and Peerform provide personal loans at very competitive rates. You can apply for a personal loans in one of these platforms in under thirty minutes.

3. Save For Retirement

If you are employed and your company offers a 401(k) plan, consider contributing to it this year if you aren’t already doing so. Typically there is a minimum amount that you need to contribute to your 401(k) to get the full company match. Consider at least contributing the minimum amount to get the full company match. The company match in your 401(k) is essentially FREE money and it’s a sacrilege to not contributing the minimum required amount to ensure you get the fully company match.

This is the time of the year when everyone gets a performance appraisal. One way you could start contributing to you retirement account is by transferring the entire amount that you get as performance appraisal into your retirement account. This should not impact your finances because you will only be transferring you incremental salary increase into your retirement account and this should not impact your take home pay.

If you already contribute to a retirement account, consider increasing your contribution by a couple of percent this year. This will not only take you one step closer to your retirement goal but will also help reduce your taxable income.

4. Create A Budget

I personally do not have a budget. But, this is something I plan on taking as a resolution this year. Based on my research everyone should have a budget to understand your income, your expenses and your savings. This will help inform how well you are doing with respect to achieving your financial goals. Creating a budget is relatively easy. There are several online tools these days to create a budget. One in particular I seemed to like is the budget calculator by bankrate.com.

A budget is a great planning/modeling tool which tells you how much you should make or how much you should spend in order be able to save a certain amount of money. In order to start your budget you need to first start tracking your finances. Without tracking your finances you wont be able to create an accurate budget. It’s not just sufficient to create a budget. The most important part of creating a budget is periodically checking in to see how you are doing against you budget and making changes as needed to ensure you don’t overshoot your budget.

5. Minimize Expenses

This is one of the most common and easiest resolutions to carry. However, it’s the most difficult to implement.

There are so many little things you can do to minimize spending such as bringing your lunch to work a few days a week. not spending any money couple of days a week etc. See this blog post for more tricks on how to minimize expenses . I believe spending money unnecessarily on things that are not really needed is a bad habit and should be broken.

Just make sure you don’t make yourself miserable trying to cut down on your expenses. Start small and work your way up. Minimizing expense is not a sprint, it’s more like a marathon. It takes time and effort. The trick is to set small achievable goals to minimize expenses and being consistent with it.

6. Invest Your Money

The only investment for most of the people I know is an employee sponsored retirement account. A retirement account alone is not sufficient. You need to diversify your investments.

This new year consider opening a brokerage account (fidelity, etrade, robinhood, webull) and invest money in stocks. If you are not comfortable buying individual stocks, invest in mutual funds or even a CD.

For people who are not comfortable investing on their own there are several online investment service such as betterment and wealthfront who will invest your money for a menial fees of 0.25%. All you need to do is answer a few questions in order for them to assess you risk level and they would decide on where to invest your money based on your risk level.

Money sitting idly (above your emergency funds) in your bank account is essentially losing value when accounted for inflation. So, consider putting your money to work by investing in any of the tools mentioned above that you feel the most comfortable with.

7. Create/Update Your Will

A will is an important tool that will protect your final wishes. The new year is a great opportunity to sit down and plan out exactly how you want your assets allocated or to assign a guardian if you have a minor child.

You need a will even if you don’t have a lot of assets. A will doesn’t have to be complicated or terribly expensive, and the peace of mind it provides for you and your loved ones is invaluable.”

If you’re unsure of where to start, read my blog on everything you need to know about a will.

Succeeding In Your Resolutions

Most of the new year resolutions fail within a month. The trick to ensuring you succeed in your new year resolutions is to set small attainable goals rather than setting lofty goals.

We are social beings and we need reassurance that we are succeeding in our endeavors. If not, we tend to get demotivated and give up on our resolutions. By setting up small goals and achieving them, you are subconsciously assuring yourself that you are capable of doing great things and this feeling of achievement eventually becomes addictive and you would want to achieve more.

I hope you found this post both helpful and inspiring. I have a feeling this is gonna be a great year for me especially since I have already lost five pounds since the beginning of the year and I hope this turns out to be a great year for you as well.

Share any of your financial New Year’s Resolutions that you are considering in the comments below.

Every Adult Should Have a Will

My wife and I had a baby last year. Since we are first generation immigrants, both our parents live back home and we do not have any immediate family in the states either. Once we had the baby we started getting worried about who would get the guardianship of the baby if something were to happen to both of us. The last thing we would want is for our precious baby to be taken away by child care services and put into foster homes. So, I started doing a lot of research on how we can ensure that our baby gets assigned to the guardian of our choice and that all our assets get transferred over to the baby. Through my research I found out that a will would be the appropriate legal vehicle to appoint a legal guardian for our baby and to ensure that all our assets get transferred to him.

What’s a Will

A will is a legal document that lets you outline how you wish your assets to be distributed upon your death. It also allows you to appoint a guardian if you have minor children. After your death, the probate court will use the will as a guideline to settle your assets.

If you die without a will, you would have died “intestate” and the so called intestacy laws would kick in. The intestacy laws vary significantly from state to state and depending on the state you live in, the probate court would decide how to distribute your assets after your death without regard for your dying wishes or the needs or your heirs.

Here are some common legal issues when you die without a will.

Inheritance

It’s a typical misconception that all your assets pass over to your spouse after your death. But, you will be surprised to know that, it’s not always the case. Only a few states have intestacy laws that allow your spouse to inherit all your assets if you have no kids outside your marriage with this spouse. In most of the states a third to a half of your assets may go to your spouse and the rest is divided among your kids. In the case of life insurance policies and accounts such as 401(k) and IRA where you have named a beneficiary the proceeds will directly go to the beneficiary, or in the case of joint accounts the proceeds will directly go to the surviving owner. So, if you don’t have a will yet, at least make sure that you have elected appropriate beneficiaries for all your retirement accounts and life insurance.

Alternatively, you can also disinherit someone through a will. You can disinherit a child or a spouse if you wish. However, if you would like to disinherit a spouse, you will need to be aware of the laws governing your state, whether it be a common law state, community property state or an equitable distribution state. A person can only disinherit a spouse in a community property state.

Guardianship Of Minor Children

Anyone with minor kids should absolutely have a will. Through a will you will be able to appoint a guardian for your kid in case anything happens to both the parents. If a guardian is not appointed at the time of death, your surviving family will have to seek help in a probate court to have a guardian appointed for your children.  The person appointed by the court may not be whom you would have wanted to be entrusted with your kids. if you have several family members you can list the order in which you would like the guardianship of your kid to be assigned. So, in case the family member who is your first choice is not able to take guardianship of the kid due to some reason, the court knows who the next in line is to assign the guardianship of the kid. In my case, I do not have immediate family members in the country. So, I have decided to assign one of my friends as a guardian and he would in turn be able to then ensure my kid is transferred over to my parents who live back home.

Financial Inheritance By Minor Children

Without a will your assets might immediately be awarded to your minor children. Can you imagine a five year old having hundreds of thousands of dollars. Though a will you can state when you would like you assets distributed to your kid. You can set it up so that your spouse manages the assets until the kid is of legal age and the kid gets the assets when he/she is of legal age.

How Do You Draft A Will?

Duh….why would anyone ask such a dumb question. A will is a legal document, so one would think that you need a lawyer to draft a will. This is a common misconception.You can obviously go to a lawyer who would help you draft a will. A standard will drafted by a lawyer could cost you anywhere from $300 – $500. However, since wills are such common documents there a several other inexpensive ways to draft a will.

• You can download a standard template from the internet to fill out a will. You can use the standard template in this link based on your state of residence and get a will drafted in less than an hour for free.
• You can use a software such as Quicken Will Maker or an online service such as Legal Zoom. This will cost you about $50 – $100.

What Makes a Will Legal?

In order for a will to be considered legal the following requirements must be fulfilled.

• The Will must be signed by at least two witnesses. Witnesses typically must be people who won’t inherit anything under the will.
• The will must be signed and dated by the grantor

A will does not have to be notarized. However, if you and your witnesses sign a self-proving affidavit before a notary public, you can help simplify the court procedures required to prove the validity of the will after you die.
This affidavit provides an extra layer of security, after your death in case the will is questioned by a family member or a third party.

A will does not have to be recorded or filed with any government agency. Just keep the will in a safe, accessible place and be sure the person in charge of winding up your affairs (your executor) knows where it is. It would also be good to distribute a copy of your will to your attorney.

Steps To Take To Execute The Will

After a persons death in order to execute a will, the executor must typically file the will with a probate court. If everything is in order, the court issues a grant of probate. This document allows financial institutions and other organizations such as the Land Title Office to rely on the will as being the last will made by the will-maker.

Conclusion

A will is an effective in estate transfer, appointing a legal guardian for minor children and other legal proceedings after death, but it comes with it own drawbacks. For instance, your estate will become part of public record, and anything left by a will must go through probate court. Also, probate attorneys can be expensive and cannot be avoided. In some instances you could loose up to 2% – 4% of your assets due to attorney fees and court cost. A Living Trust is another common method used by people who have several assets and would like to avoid the expensive and time consuming probate process. I will provide more details of a trust in a separate article.

Even with the drawbacks listed above a will is still an effective method in estate planning and every adult should minimally have a will. Creating a basic will takes about an hour and it’s a time well spent if you really care about your loved ones.

Skyrocket Your Returns By Putting Your Money in High Yield Accounts

It’s a sacrilege to have your hard earned money just sitting around in a regular checking or savings account that hardly yields any returns. If you have your money in one of the big banks such as Bank of America, Chase or Citibank, you are probably only earning about 0.01% APY on your money. The national average for a typical checking account is only about 0.17% which is significantly less than the current inflation rate which is estimated to be about 1.9%. If you have your money in one of these low yielding accounts you are actually losing money considering inflation. What it essentially means is that if you have $100 in your account today, it’s only worth $98.10 the next year adjusted for inflation.

It does not have to be that way. You can put your money in other high yield accounts to get better returns. The first things that comes to mind when people talk about high yield accounts is CD’s. But, CD’s have a minimum lock in period and there is a penalty to take the money out before the lock in period ends. It’s a common misconception that CD’s are the only safe way to earn high returns if you do not want to invest in stocks or bonds.

There are several banks which offer high yield savings accounts and rewards checking accounts which yield high returns and have the benefit of not being locked into a contract unlike the CD’s. This gives you the freedom of being able to withdraw your money any time your feel like while yielding high returns.

I have a premium rewards checking account with a Credit Union and I earned $450 on my savings of $15,000 in 2018 which amounts to a 3% APY well above inflation. You can also earn such high yields by opening high yield accounts.

Below is a list of some high yield savings and checking accounts that I have come across based on  my research.

High Yield Savings Accounts

• Sallie Mae High-Yield Savings (2.10% APY)
• Marcus High-Yield Savings (2.25% APY)
• Citizens Access online Savings (2.25% APY)
• Synchrony High Yield Savings (2.20% APY)
• Ally Bank Savings (2.00% APY)
• Incredible Bank High Yield Savings (2.20% APY, $25k+)
• American Express Personal Savings (2.10% APY)
• FNBO Direct Online Savings (2.15% APY)
• Barclays Online Savings (2.20% APY)
• HSBC Online Savings (2.22% APY)

High-Yield Rewards Checking Accounts

• Consumers Credit Union Rewards Checking (3.09% – 5.09% APY)
• Baxter Credit Union Power-Plus Checking (3.00% APY)
• Axos Banks Rewards Checking (1.25% APY)
• Redneck Bank Rewards Checking (2.75% APY)

Typically with rewards checking account there are certain requirements to quality for the higher APY. Typical requirements are to have a direct deposit setup in the account and to have a minimum number of transactions every month to quality for the high APY. Through personal experience I have noticed that most of the times I don’t meet the requirement for the minimum number of transactions. So, in order to ensure I meet the requirement for minimum number of transactions, I review my account around the last week of every month to see if I have enough transactions to meet the threshold to qualify for the high yield APY. This will give you an idea of how many transaction you need to do to meet the threshold. One trick that has worked for me to achieve the required minimum transaction threshold is to split your purchases in a store into multiple transactions. Although not ideal, this would help you meet your transaction threshold easily.

Conclusion

Don’t let your hard earned money sit idly in a low yield account. Take charge and open one of the high yield accounts listed above and put your money to work. These small but consistent changes are what will help you achieve your goal towards financial freedom.

How Much House Can You Really Afford?

Your budget is the first thing you need to figure out when you decide to buy a house. Almost everyone makes the mistake of not figuring out how much they can afford prior to looking for a house. The first instinct for a lot of people is to ask the realtor on how they could go about figuring out what their budget should be and almost always the realtor would recommend that you go to a bank and get a pre-approval to find how much they would pre-approve you for. The bank typically goes with something called the debt to income ratio. They would typically pre-approve you for approximately 43% debt to income ratio. Also, keep in mind that when they provide pre-approval the banks only consider the principal and interest payments towards the debt to equity ratio. Your monthly payments are more than just the EMI. You will have to factor in taxes, property insurance and HOA if any to calculate you total monthly payments towards your house. People assume that if you are pre-approved, you will surely be able to secure a loan for that amount. I hope it was that simple. Figuring out how much house you can afford is much more complicated than that. You would need to consider several factors prior to deciding you budget for buying a house.

The first thing we did was track our monthly expenses. We kept an excel sheet on our computer where we wrote down all our expenses every day. At the end of every day we wrote down every penny that we spent the entire day. We did this for two months. This helped us give an idea of how much we spend on an average every month. This also helped us decide what spending we needed to cut down on if we needed to in case you need to increase the budget for buying a house. This exercise would give you an idea of how much money you would minimally need to maintain your current lifestyle and how much money you would have left for putting into buying a home.

The next thing we did was identify all the fixed expenses we had every month. What I mean by that is list down all the other loans that we had such as car payments, student loans, credit card payments etc. You might also want to list other fixed expenses, such as college 529 payments that you might be making if you have kids.

Figure out how much money you want to save at the end of each month after all you expenses. It’s always a good practice to keep some money as emergency fund. We have heard experts say that you should typically have anywhere from 6 months to a year worth of liquidity cash as your emergency fund. Another reason to save money is to handle any unexpected expenses such as the furnace and A/c going bad that might come up when you buy a home.

Now you would want to figure out your monthly family income post taxes and all your pre-paids such as medical, 401(k) etc. Now that you have all the elements needed for the calculation, you can figure out how much monthly payments you can afford. In order to calculate the monthly payments you can afford subtract all the expenses listed above from your family income and that should give you the monthly payment you can afford. Keep in mind that this monthly payment that you have calculated includes the EMI, property taxes, insurance and HOA if any.

I know this is a lot of information and to a lot of people this might seems complicated. My friends have used this and it has worked really well for them. This is something that people do not want to spend their time on. But, keep in mind that buying a house is one of the most important decision that you would make as an adult. So, it would be good for you to take the time to figure out what you can afford before jumping into buying a home. I would strongly recommend doing this before you go talk to a bank or a realtor. The reason I say this is because the realtors and bankers always want you to buy an expensive house because the more expensive the house you buy the more money they make. But, at the end of the day you are the one who has to live with your decisions. Also, it’s so much easier to get carried away with buying a house. Almost everyone I know of ended up going over their initial budget. So, it’s highly recommended that you plan appropriately prior to buying the house.

At the end of the day how much you want to spend on the house depends on you. Plan appropriately prior to jumping into buying a house. Nothing beats planning. It’s better to be safe than sorry. House is meant to be a place you create memories to be cherished for a lifetime. You do not want to be enslaved to your house or want it to be a burden.

This is an excel worksheet that I’ve created that would help you calculate the budget for your house.

Please comment with other approaches that have worked for you while deciding the budget for buying a house.

Tricks To Minimize Expenses

If you have gotten to reading this post, I am assuming that you have already read the previous post and you have started tracking your financial metrics to understand where you stand with respect to your finances.

This post is meant to provide simple tricks on how to minimize non-essential expenses. Below is a list of some typical non-essential expenses based on my experience and tricks on how to reduce them.

Eating Outside

Based on my experience eating outside by far seems to account for the highest monthly expense. Everyone is constantly looking for ideas to minimize expenses on eating outside. Eating outside at work seems to be one of the most common reasons for increased expenses associated with eating outside. In order to reduce eating outside you can simply start by bringing lunch from home just a few days a week. You can bring a simple lunch such as a salad, a cold sandwich or ready to eat meals from the grocery store that can be heated up at work. This has a two fold advantage, not only does it help save money but it also makes you healthy.

Other ways to minimize expenses on eating outside is by limiting the number of times you go out to eat as a family to once per week or going out to eat only during special occasions.

Online Shopping

The other major source of unnecessary expense is online shopping. Online binge shopping has become a favorite hobby for a lot of people. People tend to buy unnecessary things online due to the great return policy with the hopes that they would return it later if they did not need that item. But, guess what, very few  people ever get to returning those unwanted items adding to unnecessary clutter and wasted money.

One way you can minimize your online spending is by curbing your urge for impulse purchases. There are several ways to minimize impulse purchases

• When you like something, don’t immediately buy it. Instead add it to your cart or click on watch/save for later. Come back a day or two later and if you still think that it is something you really need then go ahead and buy it.
• Don’t buy multiple items with the hope of keeping one and returning the others. That seldom works. Just buy one item at a time and make it a habit to not buy the next item until you have returned the first item.
• People tend to buy gift cards and add money to their online accounts so it’s easy for them to purchase items.  Always pay with your credit card or bank account each time you make a purchase. This gives you an opportunity to re-think the purchase and decide if this is a purchase you really want to make.

Cable & Internet

Cable and internet bill seems to account for another major chunk of monthly expense. Internet speeds seem to be constantly increasing and people tend to always want the highest speed internet. You obviously have to pay a premium if you want a ultra high internet speed. However, if you are a typical household and all you use your internet is for streaming videos, music and surfing the internet, an internet speed of 40 – 50 Mbps is more than sufficient. By reducing your internet speed you should be able to reduce your monthly internet bill.

Another major expense is your cable bill. People rarely watch cable these days. However people tend to pay for cable because it tends to come bundled with your internet. If you are one of those people who barely watches cable consider cutting your cable and switching to a internet only plan. This should significantly bring your monthly bill down. Instead, switch to online stream services such as Netflix, Hulu, Amazon prime etc. if you like to watch local channels, you can always buy an HD antenna and you will be able to get all your local channel and news for free.

By applying the simple tricks provided above one should be able to reduce their unnecessary monthly expense.

This is by no means an all inclusive list. Please add any tricks that have worked for you in order to reduce unnecessary expenses in the comments.

Tracking Your Finances

The first step towards achieving financial freedom is understanding where you stand with your finances. Without an understanding of your finances you would not know where to focus your improvement efforts. The two major financial metrics that everyone should track to understand their financial position is – net worth and monthly expenses.

Net Worth

Understanding your net worth is important to know where you stand in terms of your finances. Net worth includes all your assets such as your savings, 401(k) or IRA’s, any stocks or mutual funds and all your liabilities such as your credit card payments, student loan payments, mortgage payments, car payments etc. You can use a simple tools such as an excel sheet to track these items. Understanding you net worth will give you an overview of where you stand with respect to your assets and liabilities. This would give you and idea of how much you will need to save to achieve your financial goals.

Monthly Expenses

Monthly expenses is a very important metric one should track to understand your financial situation. Tracking this metric will help you understand your financial behavior and your spending habits. Once you have a good understanding of you spending habits, you can focus your efforts on cutting down unnecessary spending and bring down your expenses and increase your savings.

In order to track your expenses there are several tools available online. You can use a tool as simple as an excel sheet. All you would have to do is once every week write down all your expense in an excel sheet. All expenses including credit card payments, cash expenses, any loan payments, mortgage payments, utility bills, cable and internet bills etc. should all be included. It’s important that you religiously and meticulously record all expenses. At the end of the month you can then analyze your expenses to understand trends in your spending habits. You can break down your spending into two categories such as essentials and non-essentials.

Essentials are expenses that are required and are non-negotiable. Whereas, non-essential expenses are expenses that can be considered as discretionary spending such as eating outside, electronics, clothes etc. You should focus your efforts on non-essential expenses and try to reduce spending in this area.

Understand where you spend the most and try to make small incremental changes to reduce expenses in that particular area. Say for instance you spend a lot of money eating outside every month. You should focus your efforts on minimizing eating outside. You can cut down on eating outside by making simple changes such as taking lunch from home instead of eating out at work. This would not only be cheaper but it will also be healthy rather than eating outside every day. I will strongly encourage setting up small incremental goals to save expenses instead of making drastic changes. I have learnt from personal experience that making drastic changes is difficult to achieve and you tend to lose interest quickly. Instead making small incremental changes is sustainable and will help achieve your goals.

There are several other automated tools out there to track your expenses. Some popular tools are listed below.

• Mint
• Quicken
• Personal Capital
• Clarity Money
• Wally
• YNAB
• Mvelopes

You can find more details on these tools in this blog post – https://www.thebalance.com/best-expense-tracker-apps-4158958

In conclusion, it’s important to understand your net worth and your monthly expenses to understand your financial health. Tracking these metrics will help you understand your financial situation and identify areas to focus your efforts to minimize unnecessary expenses and increase your savings which will in turn help you achieve financial freedom.

Please share your thoughts in the comments on how you track your expenses and what tools have you used. Also, share your thoughts on how tracking these metrics have helped you make better financial decisions.