What would a new year be without some resolutions? I talked with two clients this week about a common resolution – budgeting! Specifically, they were trying to get a handle on their spending so they could set a savings plan/approach for the upcoming year and beyond.

Let’s be honest – tracking expenses can be a daunting task. It’s easy enough to figure out what you earn (especially if you are an employee) – pull up that pay stub, check the deposit into your bank account, and you are done. However, tracking where all that money goes can be a more challenging feat.

Many of us spend in a variety of ways. We may use check/ACH for larger items like property taxes or mortgage payments, credit card for most other things (and perhaps we have a few credit cards), cash for some items, etc. Pulling all this information together can be a challenge and take some time.

If you want to get a handle on your spending and commit to adding to your savings/investments, you really do need to do this detailed work. One of my favorite reminders is “you manage what you measure.” In order to lower your spending/increase your savings, you simply must pull together all of your expenses, categorize them, review the amounts and set targets to lower some items, and then monitor your progress over time.

However, if you want a shortcut way to see if you are spending beyond your means in the meantime (while you do the work), follow the cash! Odds are you have just a few cash/bank accounts where your paychecks go into and from where you spending/expenses are paid. Sure, you might have a few different bank accounts but it’s a lot easier to add those up than all of your credit card spending.

To see if you are spending beyond your means, track your bank balances back for the past 6-12 months. If your bank balances are trending down, you are spending more than you are earning (unless of course you are moving funds from the bank to investment accounts – if this happened, just exclude it from the change). Sure, there could be known reasons for cash declining over time. But whatever the justification, bank balances falling over time more than likely indicated you are spending more than you are earning. That dynamic is not sustainable – and is all the more reason to focus on managing your spending.

Hopefully this shortcut can prove useful but again, in order for budgeting to be a worthwhile and effective task, you need to do the detailed work in the long run. Here’s a prior post on budgeting to help you do that work!