How to Start Tracking Your Expenses
Whether you are in debt or not, you need to know what you are spending your money on. One of the main reasons to track your expenses isn’t what you think.
You need to track your expenses to make sure you are getting good value for your money. By value I don’t mean if it was a good deal. I mean whether or not it improved your life or helped you achieve the goals you want.
Your life can be greatly improved without any more money. It’s about taking the money you already do have and using it in ways that really further what you want in your life. So here are two quick ways to start tracking your expenses.
Tracking #1: Saving receipts (Analog)
One method is to save every receipt. When you are paying for an item ask for a receipt and keep it in your wallet or purse. When you buy something online print out the receipt or just write it on a post it note. Then you can put them in an envelope or receipt spindle to go through at a later date.
I still do this to this day. Every few days I pull out the receipts and put the numbers on our Fridge Sheet. (You can get a copy of a Fridge Sheet in the Eventual Millionaire Starer Kit by signing up for the newsletter!) The Fridge Sheet just keeps track of the categories we spend in each month so we know how much we have left to spend.
It’s simple and an easy indicator of how much money you have left to spend each month.
Tracking #2: Categories (Digital)
Another option to track your expenses is to use categories. This method is very similar to saving your receipts except you don’t need to save receipts! You create very broad categories, so you can go back into your bank account and organize your spending.
For example, you might have the categories of Car, and Store. Your Car budget has a monthly goal of $250. It includes oil changes and gas. You can go through your bank listing and determine which items go into that category.
Let’s say your Store category has a goal of $600. This means food, diapers for the kids, household items, toys, etc. It’s easier to lump everything into one big category to track. All you have to do is figure out how much you spent at each trip to Target, or Walmart, or your grocery store and all them up.
It allows flexibility in your budget so if you want to buy a little less groceries this week and instead get a new omelet pan you can.
It doesn’t allow you to drill deeper into the categories though. So you may be spending too much money on household things and not have enough food for the week!
Tracking #3: Online Tracking Software (Digital)
Signing up for Mint.com or buying Quicken can make your tracking easier too. All you need to do is enter your bank account information and these programs will sync and do the rest. They are a lot more secure than in the past and I am starting to think about switching to this method.
I’m a paper kind of gal though, (even with my IT degree!)
The First Step
If you are not tracking your expenses, start now! It won’t be perfect. But if you want to make better decisions in the future for what will improve your life and move you toward your goals, you need this information!
For example, I have a tendency to be gung ho about any project I start. Whether it be photography, or rock climbing I like to learn everything there is to know. Do you know the easiest way to feel like you are doing something with a new project? Buy things!
I bought handholds and created my own rock wall. Which now looking back seems very dumb because I barely used it! I bought a nice camera and lenses when I was learning photography. Now I use my iPhone camera. 🙂
Tracking my expenses and realizing how much I spend when I get excited about a project really puts it into perspective. Now when I take up a new project I try to keep the expense to a bare minimum. I’ll buy a book, or a few paints and a canvas.
I could have gone to a local rock climbing gym instead of building a wall. I could have found a friend with a good digital SLR camera and taken a day to take photos and see what it was like.
In Your Business
These steps also apply to your business! You need to track your expenses. I know you probably already do for tax purposes but you also need to go back and see what those expenses are getting you.
If you already track your expenses, what do you do? If not, what is stopping you from starting?
Hi I’m Jaime. Each and every week I bring you the top business advice from the people who know best.Learn More