Lately, it seems that working with my personal finances is a hobby of mine. I’ve spent a lot of time reading MSN Money’s Top 25 Articles about credit reports, credit scores, and personal finances in general. There is a lot of good information in there, and I was happy to see that I have already started taking some of the steps outlined in the various articles to clean up my credit.

The tools that I use to keep on top of my finances are Microsoft Money 2005 Deluxe and Microsoft Money for Pocket PC 2005. The first link is a free 90-day trial for Money 2006 Deluxe, as Microsoft no longer lists Money 2005 on their site.

I’ve been diligently tracking every dollar that I spend for just under two years now. I find it immensely gratifying to be able to accurately answer questions like “how much money did you spend last year on video games?” From month to month, I generate reports that show me which categories of spending have increased or decreased. Once I see that an unneccesary category has increased, I come up with a plan to reduce that spending. It usually isn’t a formal plan, or even something I write down. It is usually something that I keep in the back of my mind.

To the left is an example of a pie chart generated by MS Money to show how much of your money you put into each category (click the image to display a larger image in a pop-up window).

Whenever I spend any amount of money, I enter the date, payee, category, and amount into my PDA. I do that for up to a week’s worth of transactions before I sync my PDA with my PC. Once every other week, I compare my various account balances in Money with what the online statements show, to ensure that everything matches. Not only does this ensure the accuracy of my records, but it also allows me to use Money’s cash flow feature (more on that in a bit).

The categories of spending I have that are chronoically too high are Food: Dining Out and the Food: Lunch At Work. Unlike the Food: Groceries category, which has a set spending limit that I stick to, I make no real effort to curb spending in aforementioned categories. Nad and I are slowly reducing the amount of times we eat out, so that helps. Additionally, I take lunch to work every day, so that helps a bit, but I have not set an actual limit in either category.

One of the reasons that I allow those two food-related categories go without spending limits is because I am always aware how much I can spend.

To the right is an example of the cash flow feature mentioned earlier (click the image to display a larger image in a pop-up window). I’ve “whited-out” various bits of information from this chart, namely to remove all dollar amounts and other related info. The example chart shows a 90-day forecast. MS Money generates a cash flow for each account based on the both the monthly bills you’ve set up and your spending trends. The program estimates how much you will have on any given day. The chart shows a slump from 8/1 to 8/4, and a spike on 10/1. Armed with this kind of information well in advance, I never have to ask “can I afford to spend X amount of money?” Based on the info provided by MS Money, I can confidently make good financial decsions.

This kind of anal money-tracking has allowed me to stretch a little bit of money a long way. It is one less thing that I have to worry about every day.