Ways to track your spending

Quick insights

• To track your spending, a comprehensive list or a more organized approach can both be helpful.
• Tracking your spending and expenses deliberately can give you more insights into your finances and help you build a budget.
• The main benefit of expense tracking and budgeting alike is to make informed financial decisions.

When managing money, information is powerful, so tracking expenses could lead to more knowledgeable choices. Tracking exactly where your money goes can be a significant step toward building a brighter financial future.

How to track spending and expenses

Here are several ideas for how you could document and organize your spending activity.

Create a complete list of your expenses

This might sound simplistic but can be very effective in tracking how much money you spend in a certain period. To begin, gather statements for any accounts you use for bills and purchases. An account statement will list transactions chronologically for a set time frame.

If you’d like to tally your spending by month, you may need more than one account statement; statement periods might not align exactly with each month’s beginning and end. Whatever you decide for your complete list, pick a start and end date for the expenses you want to track. Then, you can distinguish spending transactions with a pen or highlighter.

Track by needs or wants

“Needs” are expenses you cannot avoid—essential costs like rent, utilities and food. Other purchases are usually made on what you want—video games, concerts and happy hours, for instance. Call these your “wants.”

Tracking your spending in terms of needs and wants paints a simple picture of your spending. However, that picture can still prove very informative. You create a distinction which highlights the expenses that you cannot sacrifice, as well as those you might be able to.

Track by purchase categories

Each bill and purchase you pay for can fall into a type or category, such as food, utilities and travel. You can assign categories as generally or specifically as you’d like—maybe “food” is too vague, so you could distinguish takeout purchases from grocery trips.

Organizing expenses by category can provide various insights, namely how much you spend on each category. This tracking method can also distinguish your most variable expenses, such as coffee runs and utility bills that vary each week or month. Although amounts can fluctuate, categorizing expenses can help you learn a lot about different areas of your spending over time.

Tools that can help track expenses

• Calculators: Why not get some help with the math of tracking your expenses? Using a calculator can get you to the important figures—your monthly costs, savings, debt payments and more. These specific numbers are important when analyzing behavior, projecting future expenses and staying on track with financial goals.
• Online banking: Most banks offer online platforms that allow you to view account activity. These are convenient tools for real-time expense tracking and managing your finances on your time. The dashboards might even automatically categorize transactions and provide spending summaries.
• Spreadsheets or lists: Making your own spreadsheets and lists gives you full control over the data you add. These customizable resources can be as detailed or simple as you want to make them. You can manually enter transactions, categorize them, analyze trends and more.
• Budget templates: Some programs offer predesigned templates with structured ways of tracking your income and expenses. Budget templates might even have preset categories to help you organize all your incoming and outgoing money. Any template can assist in managing your money.

Is there a right way to track your expenses?

If your goal is to improve how you manage your money, there is no right or wrong way to track your expenses. The best approach will likely be the most accurate and least tedious one. Mobile and digital banking tools can streamline the process, but pen and paper can be just as effective.

Regularly tracking expenses over time will help you determine what works for you, and you can make ongoing adjustments.

Why is it important to track spending and expenses?

Accurately tracking where your money goes typically enables you to:

• Avoid overspending
• Build emergency funds
• Grow personal savings
• Achieve long-term financial goals

These are also some of the main benefits of effective budgeting, which requires a great deal of financial tracking.

The difference between budgeting and expense tracking

In short, budgeting is financial planning, whereas expense tracking is monitoring where your money goes. Budgeting is more of a proactive approach to managing your money. You calculate how your income is used for expenses and savings. Expense tracking provides information about the money you spend, whether that’s on bills, essentials or things you want.

When you budget, you create and follow a financial plan—how income is used for expenses, savings and debt repayment. When you track expenses, the information can be added to your budget and provide financial insights. Both processes can complement each other, clarifying the view of your financial situation and helping you make important decisions.

Creating a simple and effective budget

A budget becomes effective when it clarifies your spending limits and creates a roadmap for your financial goals. To remain effective, budgets should also be adjusted when financial circumstances change.

There are several templates and strategies to choose from when creating a budget. However, here is the general approach:

1. Calculate income: Rather than your gross income, your net (or “take-home”) pay might be most useful. This is money that ultimately lands in your account that you can use for expenses and savings.
2. List expenses: To start filling out your budget, list the fixed costs or bills you pay regularly. Then, you can list other expenses that might be less regular, even if they’re estimates. If you’ve previously tracked expenses, you can enter averages or estimates for things like gas and groceries.
3. Set savings goals: Various budgeting rules suggest how much of your income you should save. Although these rules are helpful, following them strictly doesn’t suit everyone’s financial situation. Whatever amount you decide to save, include it in your budget and consider transferring it to a savings account at regular or automatic intervals.
4. Determine the remainder available for spending: This figure will be your income minus expenses and savings. Previously, you listed expenses that you can expect, whether they’re fixed or variable. You can track expenses in your budget to stay within the spending limit.

If you have a family or joint bank account, consider involving others in the budgeting process. Cooperation and sharing the budgeting responsibilities can be beneficial.

In summary

When you begin to track expenses, simple tools like account statements, calculators and transaction categories can be helpful. When expense tracking becomes a regular practice, you can learn about your money habits and build a budget. This is a tool to aid financial planning and decision-making, helping you prepare for the unexpected and realize your financial goals.