Do you know where your money goes every month?
Let me describe a scenario for you. You are at the grocery store and about to pay. You hold your breath, wince, and swipe your debit card. It says approved. You breathe a sigh of relief.
In another scenario, the first of the month rolls around and rent is due. You check your bank balance and realize after your rent withdrawal your account is overdrawn. You think to yourself…I swear I had enough!
Do any of these scenarios sound familiar? Well, I’ve experienced both and if you have experienced something similar keep reading!
If you are bringing in decent money but still feel like you are living paycheck to paycheck or worse, living outside of your means then something needs to change.
Tracking your spending will help you to keep track of your money and feel in control of your spending so you no longer have to second guess whether you have enough in your bank account.
Why You Need to Track Your Money
Tracking your expenses brings financial awareness. You become aware of your spending habits, financial lifestyle, and where you can spend less to move your money around for what is most important. Like paying down debts and saving up for a house down payment.
Tracking your spending keeps you in line to stay true to your monthly budget and know where you spend the most money. It gives you a sense of control knowing you can decide how much you want to spend in each category (food or entertainment, for example) and where you can cut down.
One of the main reasons you keep track of your expenses is to reveal your spending habits. From tracking your spending you will become more aware of how much you spend each month on your monthly subscriptions or your online shopping.
It can be a hard pill to swallow when you first sit down and track your monthly spending. The moment you realize you spend more on online shopping than your mortgage or rent is the moment you realize you need to make some changes.
A No-Brainer Method to Track Your Expenses
I like to keep things simple here at Wallet On A Diet. I focus primarily on Budgeting 101 practices. As in, I teach for beginners. I’m not about being techy or overwhelming you with a bunch of apps you can download. Here we use pen and paper.
You need an expense tracker. You can request my free expense tracker below or go with a simple notebook.
Typically an expense tracker looks like this:
You can easily write a similar chart in your handy dandy notebook. It’s important to keep track of which account you used and what you spend your money on.
At the end of the month, you add up each category for your total spending. That is when you realize exactly how much you spend on each category every month and which category you can spend less on.
It helps to color-code your spending to make it visually easier to total each category and see what category you spend the most money on and how frequently.
Physically writing down and recording your expenses is a great way to embed in your brain what you are doing with your money. I have a hard time being aware of my daily spending when it is all done for me in a digital app.
Writing your expenses down and creating a visual picture of your financial lifestyle helps you hold accountability and brings more awareness of where your money is going.
How to Get Started Tracking Your Spending
The first step is to make sure you are pulling your expenses out from every account. When you sit down to record your expenses from the previous days remember to check all your credit card statements and banking accounts.
Continually take an inventory from each account statement and don’t wait until the end of the month to track your spending. Keep a daily and weekly inventory.
Next, you want to take your expenses and organize them into categories. Some categories can be groceries, utilities, debt payments, subscriptions, auto, and entertainment.
Fixed expenses are reoccurring expenditures such as rent, insurance, and car payments.
There are two main expenses in your budget that you will divide into categories. Fixed expenses and variable expenses.
Variable expenses are more likely to change each month and can be re-evaluated and adjusted. Variable expenses can be categories like groceries, eating out, clothing, and entertainment.
Make sure you record all expenses. Even the small $1-2 dollar expenses. Everything adds up over time.
Track Your Finances to Make Changes
The main reason you want to track and categorize your expenses is so you can identify problem areas and make changes. When you become aware of where your money is going you seize control over your income and decide where you want your money to go.
For example, after tracking your “Eating Out” spending for a month or two you realize that you are overspending in that category and can easily cut it down and put that money towards something of more importance such as debt payments or your savings.
It may come as a shock to you that you are spending hundreds of dollars in categories that you find wasteful or unimportant. Now you can take that money and put it towards a financial goal.
Track Your Spending for Your Future
It is all fine and dandy creating a budget but if you don’t keep track of your spending and discover your pain points then nothing will change. And you want it to change right?
I know that for a long time I felt trapped by my financial struggles but putting simple and easy-to-use systems into place I now feel in control. Not only of my finances but of my life.
Because I can now plan my future. They say money doesn’t bring happiness but it does help make goals and dreams a reality. And I want that for you!
I’m still working on this personal finance journey just like you! I’m here to help you in any way that I can and share in this journey together.
What are your experiences with tracking your spending? If you have anything to share or any questions feel free to comment and I will be happy to help.
