As someone who saves a large percentage of her monthly paycheck [even though it isn't a huge one] I often get asked by friends how I do it. How do I know what’s the right amount to save? How do I cut down on my expenses? When do I know I’ve saved enough and I can splurge?
Everyone’s saving plans are different, and there isn’t one right way to do it. All that matters, of course, is that you’re saving enough for several possible scenarios: losing your job, an unplanned event like a stolen phone or laptop, retirement, buying a house, etc.
I always say that the first step in figuring out what savings plan is right for you is to understand where your money is going now. I’m always shocked to hear my friends say they have no idea how much money they spend each month on groceries, going out, clothing, or even utilities. Knowing what you spend on rent each month is not enough to form a smart budget & savings plan!
Enter Mint.com. I looooooove Mint, and have been a member for years. How it works is simple – you sign up, link your credit, debit and bank accounts [as well as any retirement, investment and other assets you may have] and then keep track of each and every item you spend. The only thing you need to do is login every so often and check the transactions, to be sure they aren’t categorized incorrectly. Then, at the end of each money you can see a great breakdown of where your money went…all in a fancy-pants pie chart.
Yes, it can be scary to see you just spend $1,100 last month on Food & Dining. But guess what? That’s the information you need in order to make the right decisions going forward. Once you get a better understanding of your spending habit – and I say it takes about 3 months on Mint to learn what those are – you’ll be able to see clearly where you can cut back. Trust me.
I understand that some people may be wary to hand over their login info for their bank accounts and credit cards, but Mint uses the same security precautions as the banks themselves so there isn’t a real need to worry. If you don’t feel comfortable with it, then by all means don’t use the [free!] service. But I do suggest taking all credit card and bank statements for a few months and manually separating out your spending on Excel to see [essentially] the same report.
If you aren’t sure, check out their site and see what you think. It can be a little addictive to see where your money’s going…or maybe that’s just me?