When we mention Xero, people usually associate it with running a small business. Xero is an accounting program that links to your business bank account and tracks all your income and expenses on a real time basis. The result is business owners know how their business is performing daily.
But did you know that you can do the exact same thing for your personal finances? You can connect your personal accounts to Xero and reconcile the transactions to accounts like groceries, fuel and rent. This will give you an accurate representation of your spending and whether it is out of control relative to your income.
The beauty of Xero is that you can setup rules so the transactions can automatically be categorised and make the reconciliation process less daunting.
On Xero you can also set a budget for the next twelve months. This will allow you to compare what you think you should be spending compared to what you are spending. It will also help to achieve financial goals, such as paying off your mortgage, saving for a deposit or paying off a credit card debt.
A lot of people believe that keeping track of their finances is unnecessary, as they are convinced that nothing can be done to save more money as the cost of living is too high and that expenses cannot be cut.
However, time and time again we see people that are genuinely shocked at the amount of money that gets spent in areas that can be reduced. Not only that, keeping track of your income and expenses helps to set limits on how much you should be spending. The plan to only buy 3 take away coffees a week has ballooned out to 7 without realising, and the plan to spend only $5000 on the family holiday turned out to be $9000. Without having some system in place, it is hard to know exactly what has been spent.
Once you have set everything up, it is usually wise to track the spending habits once a month and reassess where your money is going.
It may sound like too much work and you may be thinking when will I find the time, however this is something that should not be taken lightly. Ultimately it will result in better financial health and as a result less stress.