Managing your finances in 5 minutes a day

Mint tea
Mint tea, which will take longer to make than managing your finances.

A lot of people struggle to build a budget, track their spending, and really manage their finances on a regular basis. Money becomes a constant, wearying worry, just distant enough to be too much effort to deal with, and also distant enough to be easily distracted from. But your personal, or even business, finances don’t have to be a lot of work! Today I’m going to show you how to build and maintain a budget in less than 5 minutes a day, and how to keep up with your finances so you know exactly what you have and where it’s going.

Step 1: Get a Mint.com account

If you have tried Mint.com in the past, don’t stop reading just yet. I know a lot of people who logged in, were overwhelmed with everything they needed to do, and closed the tab. There is some time investment in getting everything setup, but it’s worth it.

Also, there are alternatives to Mint. The purpose of this step is to have a tool that aggregates all of your expenses. I never balance my checkbook. I never type in amounts from receipts. Mint pulls in data from my bank and credit cards and does all the tedious work of actually tracking my expenses and income.

So you can use whatever tool works for you, but get one that automates a lot of the work. I have been using Mint for over 6 years and I like it because it’s free and works well for me.

Once you get your account setup, you need to connect Mint to all of your banking websites. If you have multiple accounts at the same bank, like a checking and savings account, just connecting to the bank will connect all of your accounts. The same is true if you have multiple credit cards under the same web account. This also assumes you have some form of web banking where you can log in and view your balances and statements. This type of access is standard these days, so contact your bank for assistance or visit their website if you haven’t setup a web account yet.

I have also connected Paypal and my student loans to Mint so I can see those transactions and better track paying off my student loans. Property can be added, and that can be nice for seeing your net worth, which is the amount of everything you own (cash in the bank, house, car) minus everything you owe (credit card debt, mortgage, auto loan). If you find that you’re unable to connect an account related to property, then it may make more sense to leave that data out of Mint. For instance, we got our home loan through a local credit union, and I can’t connect that to Mint, so I didn’t put our house into Mint as property; without the balance of the debt, the value of the property would make our net worth look much higher than it really is. I still see the mortgage payment through my checking account and can budget for it, I just have to monitor my mortgage separately.

Step 2: Check in daily

Note that step 2 isn’t “make a budget.” I suggest letting Mint do its thing for a couple of months. You should log in daily, at least Tuesday through Friday (because banks don’t tend to do much over the weekend, and Monday will be catching up with weekend transactions), and categorize your transactions.

Mint categories will eventually become your budget, but right now we want to get an idea of what you’re spending. When we get to the next step of actually building your budget, we want to do that work based on data. Your budget should be established based on your income and also what you’re regularly spending. It will, by necessity, be constrained by how much money you have coming in, but if you don’t build your budget in a realistic fashion, taking into account your regular expenses, then you’ll almost certainly end up going over-budget and then just ignoring it.

So for now, just categorize things. A lot of the built-in categories in Mint will do the job, but you may have to create some custom ones. I created a bunch of distinct travel budgets because I didn’t want expenses from vacations or work travel coming out of my regular budget lines, but I still wanted to know how much we spent on food, coffee, gas, and entertainment while traveling. You can create whatever works for you, the key is to be consistent in how you categorize transactions.

In any given day, you probably won’t have more than 5 transactions to categorize. Once everything is setup, you login, check to see if things were automatically categorized (which they often will be), change them if they need to be changed, and you’re almost done. Once you have a budget setup, the last step will be to check that, but for now, just categorize to establish a baseline.

Step 3: Build your budget

Your budget is a tool in your tool belt to help you make informed decisions. Similarly, we want the budget to be informed by past revenues and expenses.

Now that you have a couple of months of data, go to the Budget tab and start creating budgets. Mint may have done some of this for you already, but I suggest really building this out to itemize it. My wife and I have separate budgets for clothes. We have a gas budget and a service/parts budget for our cars. We have categories/line items for student loan payments, and utilities, and Internet service, and our mobile phone bill. Coffee shop expenses are distinct from restaurant expenses, groceries are separated out from home supplies like cleaning chemicals, and we also have separate lines for movies and books. Some of these things might all be bought at the same store, in which case there is a bit more manual interaction in step 2 to split a transaction into multiple categories. The key is to get specific with your categorization and budgeting.

Be sure to also build in either budget lines or goals for longer-term expenses. If you know that you’re going to need a new roof in 5 years, start saving now. If you’re having a baby, or have some expensive car maintenance coming up, or want to save a certain amount for Christmas presents, setup budgets or goals. Pretty much everything that you’re going to spend should be budgeted for. This will give you visibility and the ability to plan in advance.

You’ll likely need to adjust your budget over time, and that’s OK. As you start to monitor it more, your priorities might change, or your income will go up or down and that will necessitate changes. Having a tool like Mint will give you the information you need to make those decisions a lot more easily. You’ll be able to use the Trends feature to see how much you’ve been spending on any given category, and then decide what you can adjust and what you cannot adjust.

You also may go over budget for a category sometimes. I have a lot of my budgets setup to roll over from one month to the next, just like a lot of us have our mobile minutes roll over. This way I can build one up, or if it goes over, I know I just need to spend less next month. But there are some budgets like groceries that by necessity go over whenever we have family stay with us for a week, or we host a couple of parties. We try to take those things into account, but sometimes we just have to spend more, and that doesn’t mean we can spend less the next month. You can reset the accrual of a budget back to $0, and I have to do that sometimes. The important thing is knowing that it happened, and making sure you’re not spending more than you have.

Step 4: Maintain your finances

Five minutes a day, four days a week, my process looks like this:

  1. Log in and let Mint sync while I read Reddit for a bit
  2. Switch back to Mint and go to Transactions to check categories
    1. Re-categorize if necessary
    2. Split transactions if necessary (rare)
  3. Switch to the Overview tab and compare the amount of cash in checking to the month’s budgeted expenses and credit card debt
    1. At the start of the month, there may be less money in checking because we get paid mid-month. So sometimes I have to mentally add up what our income will be, or I can look at the Budget tab where our income will be listed and calculated for me
    2. (Cash in checking) – (budgeted expenses) – (credit card debt)
      1. If the number is positive, great
      2. If the number is negative, then I either need to figure out where to reduce in the budget, or I need to transfer money from savings

That’s pretty much it. Those three steps take very little time, and while connecting bank accounts took a bit longer, that was time spent 6 years ago that has paid massive dividends.

Once you know your budget and you have introduced some stability, you can start saying yes and no to things. Yes, we can afford to go out for a fancy dinner, or we can afford that trip, or we can afford that new TV because we know exactly what our expenses will be and we have saved enough money for it. Or no, we can’t afford those new shoes right now, or to go out for a fancy dinner, and we’ll need to wait until next month when the budget resets.

You can also use this as a tool to increase your savings. I set goals for big expenses and then setup automatic transfers to savings with my bank for those goals. This gives us a lot of freedom financially; I don’t have to feel guilty about splurging a bit on something I want because I know that I’ve already saved for all the things I need.

Budgeting and managing finances is often intimidating to people, but it doesn’t have to be time consuming or hard. Let the tool do most of the work for you, and then enjoy the benefits of a balanced budget: less uncertainty, more freedom, and easier decision making.

 

One thought on “Managing your finances in 5 minutes a day

  1. Thanks Matthew! I’ve heard of mint but never talked to anyone who uses it. I think with your help here, I may give it a try!

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