Now that you’ve got some money coming in (and going out!), you need to decide how to keep track of it, so you have a clear picture of what it’s doing for you, and how you’re using it.

There are lots of options for tracking your expenses and income, with lots of detail or just a little, depending on how much you need to be able to analyse.

Let’s start with the simplest option:  the notebook and pen. A ledger style notebook, where the pages are already divided into rows and columns, helps keep things organized, but a regular notebook will also work, as long as you’re consistent with how you make your entries.  For example, you should always include the date on the entry, whether it’s for income or expense. Doing this helps you see patterns to your spending. Also, if there’s ever a question about a payment, having dated entries gives you a timeline of events and notes give you the details that will help clear up the confusion.

Next, include a note about what this entry is. This is more than if it’s an income or an expense; this is where you specify that it’s prize money from the Science Fair, that Christmas money from Gran, your paycheck, or the spare coins you found while cleaning out the sofa.Those are all income, obviously. Expenses need the same treatment:  tickets for a concert, new jeans, refilling your Leap card, or buying new materials for your painting.

Last, the amount itself.  Obviously, knowing whether this is money that is coming in or going out is an important distinction. You can differentiate between the two by putting the entries in separate columns or by using a different color ink. The traditional colors are red for expenses and black for income, but you can use any two colors you like, as long as you’re consistent about which is which.  That’s where the saying “in the black” came from, by the way. It refers to a business making more money than it spends.

Once you’ve got your information entered, all that’s left is to do the math.  You calculate by either adding (for income) or subtracting (for expenses) the amount from the previous total.  You should write the new total on the line beneath. If you do this, every entry for either income or expense will have your current available money written below it, and you’ll always know how much you have to work with.  

The benefits to the pen & paper method are that it’s cheap to get started and easy to use. One of the drawbacks is that you might misplace the ledger. Then when you want to make an entry, it’s not readily available, so you tell yourself that you’ll enter it later, or you just scribble the entry on a random scrap of paper. In order for the ledger to work, it’s crucial to enter the information right away and consistently. Another drawback is that not all of us have stellar penmanship.  If your writing isn’t the best, you might enter some information but not be able to read it when you go back later. And then there’s the math. Addition and subtraction aren’t hard, but it has to be done. Of course, there’s always the calculator on your phone for that.

And that, rather snappily, brings us to the next option:  your phone. Aren’t there apps for keeping track of your money?  There are – veritable dozens of them. How do you evaluate which one is the best for you? That depends on your needs. If you already have a bank account, those institutions may have apps for you to keep track of your money, but that’s only for the money in the account, not cash you might keep around for odds and ends. If you use a third party app on your phone, you can typically include any money you have (that’s usually called ‘cash-in-hand’) as another account, and keep track of your spontaneous purchases easily.

Using your phone to keep track of your finances has the huge advantage of convenience.  There’s no excuse about waiting until you get home to your ledger to enter information. Also, the state of your handwriting is a complete non issue, since you’re typing the entries. Many apps will send you notifications if your balance goes below a certain amount, so you don’t totally run out of funds without notice.

Some apps even let you take a photo of your receipt, and then pulls the pertinent info from it for you, entering everything automatically and calculating your remaining available balances right on the spot.

However, a phone does lack the power and flexibility of certain computer programs, can be offline if you happen to be somewhere where there’s no signal, and then there’s the battery….we all know how often the battery goes dead just when you need it most, don’t we?

OK then – what about keeping track of everything on your laptop or desktop in a software program specially designed to track finances?

True, a full computer doesn’t have the portability of your phone.  So why bother? If all you want is to keep track of your current balance, you might not want to. But if you find that you really enjoy seeing where your money goes and the patterns in your spending, a spreadsheet program, such as Excel, can be invaluable. These programs can easily generate graphs and charts to give you a more visual, graphic view of your information.

If you’re serious about building a business you can even use a simple cloud based or desktop accounting program that will guide you through invoicing, time tracking, paying bills and billing customers – it’s overkill if you’re just tracking your pocket change, but if your dog-walking business is growing, it’s not a bad idea to get in the habit of incorporating good business tools from the beginning. They can even be fun to learn and use!

Whatever tool you decide to use depends on your priorities–do you value portability most? Go with your cell.  Are power and options what you need? The desktop programs are for you. Want something that’s easy to start? Get out the notebook.

They’re all good choices in and of themselves. But there will be one that will work best for you. To us an old movie line, “Choose wisely.”