If you want better insight into your expenses, tracking your spending is the most effective thing you can do to manage your money and stay out of debt.
For many people, this task can be daunting, but it doesn’t have to be, and tracking your spending habits can have a huge impact on your finances.
If you’re not sure where to start or if you find it difficult to keep track of your expenses, these five tips will help make the process a little bit easier.
Use pen and paper for expense tracking
The simplest method to track expenses is to write them down the old-fashioned way, with pen and paper.
Each time you make a purchase, jot down what it was, how much it cost, and where you bought it.
At the end of each day or week, add up your total spending for that period.
This method may not be the most high-tech expense tracker, but it’s effective and can help you get a better handle on where your money is going.
Also, if you like the idea of writing things by hand but prefer something a bit fancier than just plain paper, you can find printable expense trackers on Etsy.
Use a spreadsheet
If you prefer to keep things digital, create a spreadsheet in Microsoft Excel or Google Sheets.
Again, each time you make a purchase, add the relevant details to the spreadsheet.
You can even include a column for the date of the purchase, which can be helpful if you want to track expenses over time.
At the end of each day or week, total up your expenses for that period and add the information to the spreadsheet.
This method will take a bit more time than simply writing things down, but it can be helpful to have all of your information in one place.
Plus, it’s easier to organize and sort your data based on dates, stores, and different categories to give you a more complete picture of your spending.
Use a budgeting app or accounting software
There are many different budgeting apps available that can help you track your expenses.
Mint is a popular option, and it’s free to use.
With Mint, you can connect your bank account, credit cards, and other financial accounts, and the app will categorize your transactions and give you a spending breakdown of where your money is going.
You can also set up budgets and track your progress over time.
For a more comprehensive financial management tool, You Need a Budget (YNAB) is another option to consider.
Their app makes it super
If you prefer to use cash but keep forgetting to track it, an app can help with that too. Look for a budgeting app that has a built-in cash-tracking feature.
Goodbudget is one option that allows you to track your cash purchases, in addition to other methods (such as credit cards and bank accounts).
To use Goodbudget, you’ll need to create an account and add your transactions manually, but the app makes it easy to do so. You can try the free version or upgrade for premium features.
EveryDollar, PocketGuard, and HoneyDue are some other apps that offer budgeting and the ability to track expenses.
Track your expenses with a credit or debit card
If you find it difficult to keep track of your cash outflows, consider using a credit or debit card instead.
When you use a card, you’ll have a record of all your transactions, which can be helpful when it comes time to track your expenses.
Just be sure to pay off your balance in full each month to avoid interest charges.
If you’re not comfortable using a credit card for everyday purchases, you could get a debit card from your bank that is linked to your checking account.
This way, you can still track your expenses and have the convenience of using a card without the worry of accruing debt.
Use expense tracker apps
There are also several apps specifically designed for tracking expenses.
RocketMoney (formerly Truebill) is an expense tracker app that also helps you spot recurring expenses and cancel unused subscriptions that may be costing you money.
Another expense tracking app is Chronicle, a Mac/iOS-specific app that allows you to manually track your bills and subscriptions. Chronicle can also generate expense reports and graphs to see where you’re spending your money.
And don’t forget you can also use your bank or credit card itself to help you track and monitor your expenses.
Check your security settings and sign up for alerts whenever a transaction is made from your account.
Use separate spending accounts
If you’ve struggled with traditional budgeting methods but still want more control over managing money, try using separate checking accounts based on your goals.
For example, you could have a bill payment account specifically for automatic monthly payments that are predictable, like rent and utilities, and another account for more variable costs like gas and groceries.
You could even add a third account for non-essential expenses like entertainment and dining out.
This method can help you stay on track because you’ll be able to see exactly how much money you have available to spend in each account.
Plus, it can help you save money by keeping your non-essential expenses separate from your other bills.
With this strategy, you wouldn’t be recording your expenses as much as reviewing them each time you log in to your bank account.
Try the envelope method
If you prefer to use cash for your expenses, try using a cash envelope system.
To do this, you’ll need to label a few envelopes with your spending categories (such as groceries, gas, and entertainment).
Then, when you get paid, withdraw the amount of cash that you want to spend in each category for the week or month and put it into the corresponding envelope.
When you go to make a purchase, only use the cash that you have in the envelope.
If you run out of cash in one category, you’ll need to either wait until your next payday to spend more or find the money from other expense categories in your budget.
This system can help you manage your monthly cash flow and stick to your limits because it’s more difficult to overspend when you’re using cash.
Plus, it can help you stay mindful of your spending because you’ll need to physically hand over the cash each time you make a purchase.
Evaluating your starting and ending balances in each envelope is one way to track your expenses, but it may also be a good idea to note your purchases on a slip of paper inside the envelope or on the envelope itself.
This way, you have a record of where you spent your money, not just how much you spent.
Download your statements
Another way to track your expenses is to download your bank statements and review them each month.
Most financial institutions provide at least a year’s worth of transactions that you can download and evaluate.
This post-mortem approach won’t keep you from overspending in real-time, but if you’re disciplined enough that overspending isn’t usually an issue, simply reviewing your statements may be sufficient to track where your money’s been going.
Track your net worth
One final way to track your finances is by tracking your net worth.
Your net worth is the total value of your assets minus the total of your liabilities.
To calculate it, simply add up the value of your savings, investments, and property and subtract any debts that you owe (such as student loans, credit cards, and mortgages).
Your net worth can give you a good overview of your financial health because it shows you how much you’re worth financially.
If your net worth is positive, it means that your assets are worth more than your liabilities.
If it’s negative, it means that you owe more money than you own.
Tracking your net worth can be a helpful way to stay on top of your finances and make sure that you’re moving in the right direction financially.
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Expense tracker options for small businesses
For small business owners and self-employed folks who need something more robust to handle business expenses, Quickbooks online is a great option.
While it’s not free, it is fairly priced and offers features like invoicing, tracking inventory, and creating reports – making it well worth the cost for business owners.
Another option particularly helpful to businesses that generate a lot of paper receipts is Shoeboxed.
Shoeboxed will scan and upload receipts you’ve mailed to them, extracting key data and providing reports you can reference and organize.
Why tracking expenses is important
No matter which method you choose, keeping track of your expenses is important for a few reasons.
First, it can help you get an idea of where your money is going each month. This knowledge can be helpful in creating or adjusting your budget so that your spending aligns with your goals.
Second, tracking your expenses can help you identify and address any problem spending areas.
If you notice that you’re spending a lot of money in one particular area, you can take steps to cut back or redirect that money to more important financial goals.
Finally, tracking your expenses can help you stay accountable to yourself and your financial goals.
There are a lot of different ways to track your expenses, but the best way is whichever way you’ll actually do it consistently.
If you can find a system that you’re comfortable with and that fits into your lifestyle, you’ll be more likely to stick with it and reap the benefits of knowing where your money is going.
What method do you use to track your expenses? Let me know in the comments below.
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