Whether you want to save money, pay off debt, or simply gain a better understanding of your financial habits, it’s essential to keep a close eye on your spending.
This article explores five essential strategies to help you track your monthly expenses, empowering you to make more informed decisions and continue working toward your financial goals.
Follow a budget and set limits
The foundation of effective expense tracking is a well-structured budget. To create one, start by discerning and listing your fixed monthly costs, such as your rent or mortgage, utilities, insurance, and debt payments, and your typical discretionary spending for necessities like groceries and gas and wants like entertainment and dining out. This will give you a rough idea of how much you’re making versus spending each month. You can then use this data to create specific categories for your expenses and allocate a monthly budget for each. These personalized groupings and limits can help you maintain control over your habits and allow you to stay mindful of both the amount and nature of your expenditures.
Find the right method
What works for another person might not work for you, so it’s essential to find an expense-tracking method you’ll actually stick to. For instance, you can use a spreadsheet or physical notebook to track your expenses yourself. This method is hands on and requires your active participation, which may help you grasp the numbers and stay on top of your spending better. On the other hand, if you don’t want the trouble of manually sorting your expenses each month, there are a variety of free and paid apps that can automatically do it for you. These tools link to your bank accounts and credit cards, categorizing each of your transactions and giving insights into your financial habits. These apps, in conjunction with a financial advisor, may help you the best.
Record everything (including cash)
If you’re using a budgeting app connected to your bank account, it’ll automatically record each of your expenses when they occur. But if you’re opting to track your spending manually, you’ll need to keep a collection of your receipts, whether physical or emailed, and regularly check your bank and credit card statements. Make note of every expense, no matter how small, adding it to the total amount spent in each category. And no matter your method, don’t forget about cash. It’s easy to underestimate how much you spend each month if you’re using cash, so be sure to log it each time you do.
Make it a habit
Ultimately, expense tracking can only work when you are consistent and habitually log and review every expense. Start by updating your physical tracker or checking your app once a week. Pick a specific day to do it, setting a reminder so you don’t forget about it. This will help ensure you’re not going over budget since you can’t know you’re overspending if you aren’t paying attention. Even more, consistently tracking will enable you to identify any trends and patterns in your spending habits. Are there areas where you continually overspend? Are you spending less in one category? By seeing what is and isn’t working, you can make necessary changes either to your budget or your behaviors. Once that’s ingrained into your routine, consider whether you want to track more frequently, such as every day. After all, the more you’re on top of the data, the quicker you can adjust and stay on track with your goals.
Always strive to be honest with yourself regarding your financial habits. If you find you’re spending too much on items you don’t really need, don’t hide it or try to fudge the numbers. Instead, take a moment to consider why you may be shopping or dining out more, then determine how you can spend less in these categories going forward. It’s only through this honest examination that you can begin to develop better and healthier habits.
Tracking your monthly expenses allows you to take control of your finances and make informed decisions. If you would like more guidance or have a more complex financial situation, work with a financial advisor who can help you throughout the process.