How I Took Control of My Finances

As I mentioned before, I was not always on top of my finances. It took a lot of trial, error, and (ironically) money to discover the path that best worked for me. While not everyone works the same way I do, I hope to at least provide an avenue of exploration before moving on to try some other approach.

As an aside, I’d like to mention how links are used in this post. I gloss over some rather important details, such as what something is or how it works, because something I linked to could do a better job of giving them. I recommend reading the links that interest you as you read the post and then resume where you left off.

At the risk of sounding like some clickbait blogger, there were three things I needed to do. These things occurred in the following order:

  1. Be open minded and maintain self-control.
  2. Document all of my income and transactions.
  3. Use tools to simplify budgeting as much as possible.

 Know Thyself

For some people, fixing their financial issues can be as simple as just doing it. They already know what is wrong, what they can do to fix it, and have what they need to see it through. The issue could be simply a lack of knowledge. For people like me, it’s not so simple. We can rationalize away any problems we recognize and plug our ears when we receive unsolicited advice and as a consequence not understand what ails us.

It took a serious conversation about my finances with my fiancée before I was shaken loose from my stubborn behavior. I had financial issues which were due in part to a lack of direction in my life. I was just living in the present with little regard for what I would want or need to do in the future. After learning about the ambitions my fiancée held, I was inspired to do the same.

The problem I had was that the choices I made with my money didn’t align with the future that I wanted. This was the realization I needed in order to understand that what I was doing now, and had done in the past, was wrong. A change was needed.

Knowing that change was needed was not enough. I needed to have the willpower to see it through, to fight my bad habits and stick to the plan. My desire to live a happy and comfortable life with my fiancée was the fuel for that fire. While that is true, and maybe a little touching, I also needed to constantly remind myself and encourage myself to make the right choices.

Fighting myself was the hardest thing I have ever done, but I did it. Unfortunately, there is no one size fits all solution to this problem. One thing that did help me was repetition. The more often I made the responsible financial decision, the easier it was the next time. I noticed this and took comfort that the psychological discomfort I endured in the mean time would eventually stop, or at least have greatly diminished.

 Data Mine Thyself

Cool, now I know what I want and realize that I was on the wrong path. So how do I go about fixing that?

It wasn’t until I tried to figure out how to pay down my debts that I realized I produced a lot of information and not taking advantage of any of it. This information came in many forms, some being:

All of this information is trying to tell me where I’m currently at and where I’m headed with my finances, but because I hadn’t organized any of it I wouldn’t know. Once I realized this, I looked for ways to aggregate and process all of this data.

My first attempt was with a service called Mint. While the service is great for some people, I had a couple of issues with it. Keep in mind that things could have change since I last used Mint, which I believe was back in 2010.

The first problem I had was that it required no vigilance. Mint’s service will automatically process bank records to include them in its reports about how much money has been spent in various categories I have set. The issue I have with this is that it does not require me to do anything unless some information for a transaction needs to be updated. I learned that I needed to maintain a habit of checking each and every transaction I make so that I maintain an awareness of what state my finances are in. Failing that, I would become lazy and accidentally overspend.

The second problem is that Mint only tracks money after it has been spent. It is naïve about how much money I actually have. A large transaction can throw me into debt, but I wouldn’t know that because Mint would simply say that I ran over a specific budget with that transaction. I would see that there is a balance on my credit card, but it was not immediately obvious that I did not have the funds in my checking account to pay it off.

The Good
  • Monitors connected accounts for new transactions.
  • Automatically categorizes accounts based on transaction history.
  • Notifies you when budgets have been exceeded.
The Bad
  • Does not require constant attention, encouraging laziness.
  • Is naïve about account balances and going into debt.

I eventually stumbled onto a bank called Simple. When I learned that it had integrated a digital form of the envelope budgeting system directly into its banking experience, I was immediately interested. When I learned that it was fee free I opened an account and moved all of my money there as soon as possible. The speed at which I did this was mostly due to the fact that my previous bank (Wells Fargo and a shady local credit union) became untrustworthy.

While their envelope budgeting feature, Goals, was a little gimmicky I made it work for my needs. Basically, I created multiple goals that I treated as virtual accounts. Whenever I received money I would immediately divide it among all of my envelopes and whenever a transaction cleared I would immediate assign it the budget it was from. This approach allowed me to see exactly how much I had and for what purpose. If I spent too much from one envelope and used the others to compensate, I would immediately know how much I was short for the other envelopes.

Unfortunately, Simple had its own set of problems. The budgeting feature really only worked if I used the account directly using my debit card. Because I generally only use my credit card, to protect my checking account in case the card number is stolen, I had to manually move money from one budget to the credit card budget but this step did not allow me to document why the money moved. I essentially just had a pile of money on the credit card budget for the pay off. While this did help me prevent over spending, I needed more information about my spending habits to know what I can cut back on.

I ultimately left Simple for two other reasons: loss of confidence and a consolidated banking experience. Up until 2014, Simple was cranking out new features and cleaning things up on a regular basis. Since its acquisition by BBVA, Simple went from innovation into a migration mode. That on its own was not such a big deal, but when the migration eventually realized gimped versions of previously fantastic features I had lost confidence that things were going to improve. The lack of support for checks and having a branch to withdraw cash from were also major pain points.

The Good
  • Almost no fees for anything that would affect most people.
  • Built in envelope budgeting system known as “Goals”.
  • Annotated transactions including location and pictures.
  • Modern web and mobile application user interface and experience.
The Bad
  • Online only bank with limited ATM access and no cash deposits.
  • Does not support writing checks.
  • Degraded feature set since move to BBVA accounts.
  • Cannot track expenses outside of Simple managed accounts.

As I shopped around for a more traditional bank, I began researching available services for budgeting. It was at around this time that my fiancée recommended that I take a look at an online service called You Need a Budget (YNAB).

 Refine Thyself

While Simple aided in the process of my learning how to use the envelope budgeting system, it wasn’t very helpful for any transaction that occurred outside of the accounts Simple managed. This made tracking credit card expenses difficult. YNAB managed to solve this problem for me by separating the envelope budgeting system from the bank.

For about a month I budgeted my funds with YNAB, in addition to managing my budgets in Simple. YNAB does everything Simple’s budgeting system did, but dialed up the usefulness to 11. I was able to create groups of budget categories, log transactions from multiple types of accounts, and view reports on all of my expenses.

As my trial subscription with YNAB expired, I decided to pay for it as I believed my experimentation was about to pay off. YNAB has a very steep learning curve. I messed up many times and had to completely redo my budget several times because there are some quirks with how YNAB implements the envelope budgeting system. After another month, I decided I was ready to move away from Simple and still be capable of keeping a handle on my budgets.

You Need a Budget (YNAB)
The Good
  • Supports many types of accounts (e.g. checking, savings, credit, cash)
  • Generates reports based on past expenses.
  • Allows tracking of recurring expenses.
  • Makes it easy to start from a clean slate.
The Bad
  • Steep learning curve, has some required reading.
  • There is a prescribed way of budgeting, “the YNAB method”.
  • It is very easy to mess up a budget which quickly gets confusing. Undo function only available on the web interface and only in the same session.

I decided to move to Chase because they seemed to be the bank with the least amount of questionable activity in recent memory. They also offered an enticing credit card and I preferred to keep everything with one bank for the sake of simplicity.

In case there is any interest, I am considering documenting exactly how I do my finances so that others can replicate it. It’ll be more of something that someone with no guidance can pick up and run with instead of overriding anything an experienced “budgeter” might do.


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