How To Track Your Expenses
Long-term financial health starts with understanding your spending. If you overspend or are missing financial goals, it’s time to learn where your paychecks are going. To start, you need to have a budget, then you can start tracking your expenses.
Why
Tracking your expenses paints a picture of your overall financial health. When you track your expenses you can:
- See where you overspend
- Spot fraudulent activity sooner
- Cause you to think before you indulge
- Reach your financial goals faster
1. Choose A Tracking Method
Ye Ole Pen & Paper
An easy and simple way to track your expenses is with pen and paper. These are two items you can easily find around your house and start tracking with immediately. The biggest con is remembering where you put your paper and having enough of it.
Spreadsheet
Are you an Excel wiz? Tracking expenses through Excel or another digital spreadsheet tool could be the best fit for you. You can organize it with all the rows and columns of your desires and customize it to your natural spending habits. Then you can enhance it with some addition and subtraction formulas and take human error out of the equation.
App
Need to track your expenses? There’s an app for that. If you are looking for an on-the-go money management solution, this is the best option. Many budgeting and expense-tracking apps simplify the tracking process by linking your bank account to it. From there, it automatically organizes your expenses and allows you to take it a step further by setting limits on categories, creating goals, and getting alerts when you overspend.
2. Categorize Your Spending
To understand where you are spending your money, it’s best to track your expenses by categories. Categories should reflect what is listed on your budget and include:
- Rent/Mortgage
- Utilities
- Groceries
- Gas/Transportation
- Loans
- Dining out
- Self care
- Subscriptions
- Clothing
- Travel expenses
- Home décor
You can start tracking your expenses by looking at your debit and credit card transactions. Each transaction tells a story about how you decided to spend your money. Once you have a budget and tracking expense method, you can start filing your individual transactions under the correct category.
3. Check It Against Your Budget
Once you have tracked some expenses, check the total numbers against your budget. If it is the 15th of the month, and you have already spent $50 more by eating out than what your budget allows, then you should not eat out anymore for the rest of the month, cook more meals at home, and look where you can cut back in another category to make up for going over your dining out budget.
4. Utilize Leftover Money
At the end of the month, go through each category and adjust your budget accordingly for the next month. In addition, if you come out with a positive number in your budget, you have extra money to use! You can use this money to make an extra payment on a debt or put it into a high-yield savings account.
Understanding where your money goes after each paycheck opens the door to new savings opportunities and help us recognize where we overspend. Once we have that financial picture, we can be more deliberate with our money and reach our financial goals.