One of the key areas of controlling your finances is to control expenses. To many, this might be a very obvious point, but in reality it is much harder to do. We all know that the less you spend the more you can save, but do we really apply that advice? How many of us can put off instant gratification so we can save?
The problem boils down to psychology. Our present selves view our future selves as complete strangers. Because of this, we tend not to take our futures too seriously. We do things and expect our future selves to fix the problem. Sound familiar Take diets and exercise. We choose to eat poorly and not exercise, we gain weight. We know we should exercise and reduce the amount we eat, we know that if we don't we will develop health problems, but we can do it later. We wholeheartedly expect that our future selves will fix the problems. The failure of this method, this thought, is that we are the future selves, and eventually (as will all people) we won't have a future self that will fix the problem.
To go back to my point, how do we control spending? The easiest way to do it is to track spending. Record every time you spend money. This sounds very tedious, but it is illuminating. Do this for one week, and you will be amazed on what you spend. Many times, we swipe our cards and not thinking about it. These purchases, the ones we do without thinking, cost us the most. The goal of this exercise is to make us conscious of our spending.
After doing this for a few weeks one will become more aware of the flow of money. This is a key point of taking control of your money. YNAB helps, because unlike other software (Quicken and Mint) you have to manually enter each transaction. Quicken and Mint automatically categorizes your transactions. This means your daily routine of analysing your finances becomes nothing more than viewing graphs and making sure your software categorized everything correctly.
One final method of controlling expenses is to use cash. Cash is finite. How hard is it for you to break a hundred dollar bill? You are more frugal when your wallet is filled with hundred dollar bills than with singles. You can visibly see your money deplete, and once it is gone you cannot spend more. If you combine this method with tracking your expenses (either using a spreadsheet, Quicken, Mint or YNAB) you will see an increase of funds within a month. My wife and I noticed an increase of $200.
The Pareto Principle or also known as the The 80/20 Rule is simple:
"Roughly 80% of the effects come from 20% of the causes"
A quick glance at the wiki article above sums up that the 80/20 rule is applied to different areas from economics to nature. I suggest we apply the same rule to personal finances. 20% of your income should generate 80% of your wealth.
How is this possible? Live off of 80% of your income and save the other 20%. That 20% should then be divided according to your family needs. Do you have an emergency fund? If you don't, you should take that 20% and build a 3 month one first. Have debt? After you have an emergency fund, take that 20% and pay off debt. Once you finish those steps then save 10% of that 20 for retirement (especially if your young). If your older save 15% for retirement out of that 20%.
The rest of that twenty should go into saving for items that you may want like a new car, furniture, vacations, college, and so on. This method will allow you to pay in cash for items, and gives you negotiation room when haggling. It will free you from using "90 days same as cash" or other financing scams that will put you in the hole.
The very act of paying off debt is equal to getting a raise. The money you spend every month on credit card minimum payments could go to savings. Once the debt is go, you can pay using cash for the things you want.
I suggest using YNAB to start you off on the road of financial management. Once you have a buffer, then move to Quicken to maximize the money you earn and keep.
Many people, in times of economic uncertainty run to precious metals to hedge against inflation. I believe that having physical on hand gold may be a little extreme, but having precious metals in your portfolio isn't an extreme or far-out idea. Precious metals bring a constant and steady rate of return. Precious metals have done great the past couple of years because of the uncertainty in the world market. I do believe that silver might be over sold, but gold would be a good hedge since it is the international unit of exchange after the US dollar.
But this post isn't to talk about the value of precious metals or why you should or shouldn't buy them. The point of this post is to explain on how to track them in Quicken. I believe the more you know of your finances the better you are at understanding how well you are. Knowledge is important. You have to know what your net worth is. You have to know the value of the gold you keep in a safe in your bedroom behind the painted portrait of your mom. Why? Knowing your net worth is a way to see how well you are doing. If you have a negative net worth, you know you are doing something wrong or its been a bad year. If you have a net worth of over a million? Congratulations, you are a millionaire.
Since some people have physical gold on hand, and not in a brokerage how would you track it in Quicken? You could just create an asset account and update the total amount using transactions but that takes time and is inefficient.
The best choice is to go to add an account-->Advanced Set-up-->Click I want to enter my transactions manually-->Create account name "Gold in safe, or gold at Bank of America"-->Set the start date to the beginning of the year with the account amount being zero (This will allow my purchase of a gold to become a transfer into my account)--> Then enter the ETF symbol for gold (GLD)*** or SLV*** for silver, Quicken will automatically adjust your value every time you update you stock quotes-->Once Quicken finds you quote for gold, click other-->Enter your total shares (for gold see note below)-->Click done--> Say no to the mutual fund option that Quicken gives.
Congratulations, you are now tracking the value of your physical on hand gold in Quicken!
*** NOTE: The Silver exchange-traded fund tracks the price of one ounce of silver, so if you have 10 10 troy ounce ingots then you say you have 100 ounces of silver. Gold is tracked by one tenth an ounce of gold, so when you enter your investments, you’ll need to multiply your quantity by ten. For example, if you buy two ounces of gold, you would enter this as a purchase of 20 shares rather than two.
