Tips for Tracking Spending
If you don’t track what you buy and how much you spend, you won’t know where your money is going. This means you’ll end up at the end of the month not knowing what happened to your paycheque. Also, if you’re not tracking spending, it becomes very tough to stay on budget.
Making sure you stay within the limits you’ve given yourself for each spending category (food, entertainment, transportation, etc.) is an important part of budgeting and this is only possible if you track your spending.
However, many people have trouble tracking their spending accurately and sticking to it. Here are some tips that can make tracking spending easier and more effective.
Use a Method You’re Comfortable With
There are many different ways to track spending. Some people choose to use an app on their phone while others prefer a spreadsheet on their computer. Other people would rather use a pen and paper, a notepad they carry around with them, or a series of envelopes that they place notes and receipts into to classify their spending. None of these methods are right or wrong, they’re all different, and they each work differently for different people.
It’s important to use a method that works for you. If you try to track your spending using a system that you don’t find convenient, easy, and intuitive, you’ll be a lot less likely to keep going. That’s why it’s critical that you choose a method of tracking spending that you feel comfortable with.
If you’re splitting your spending with your family and putting your spending reports into a single budget, that doesn’t mean each family member has to use the same tracking method. While everyone using the same app or spreadsheet can be useful, it’s more important that everyone chooses a method that works for them. You’ll have to come up with a way to combine everything together at least once a month, but this is often better than forcing people to work with a method they don’t feel comfortable with
Note Purchases Quickly
One of the keys to tracking spending is to record your purchases shortly after you make them. If you wait a long time between buying something and recording it in your spending log, you’ll be more likely to forget some items or some of the details.
Tracking spending is most effective when it’s thorough and comprehensive. That means note your purchases shortly after you make them, so you don’t miss any.
As mentioned, it’s important to track every purchase you make, no matter how small or unimportant it may seem at the time. A small purchase like a pack of gum or a coffee on the way to work may not seem like a purchase that’s worth recording, but these small expenses add up. If you don’t take note of them, there will be money that you won’t be able to account for and you won’t know where it’s gone.
Tracking spending helps you recognize trends and spot areas for improvement. For instance, if you review your spending and realize that you’ve spent more money on coffee than you expected, for example, this could be an opportunity to change your behaviour. If you don’t note these purchases, you won’t be able to make this connection.
When your spending reports are more accurate, they give you useful information that you can use to modify your budget or change your spending habits. Being able to do this will motivate you to keep going and inspire you to keep tracking every purchase you make.
Not only will tracking every single purchase make your results more accurate, but it will also keep you in the habit of recording your purchases. Once you start tracking and once you commit to recording every purchase, you’ll get into a rhythm and tracking spending will soon be second nature for you.
Have Goals and Rewards
It’s important to reward yourself if you achieve your goals. If one of your goals is to track your spending and use the information you gather to improve your budget, then you should give yourself a reward for achieving this goal. Set a milestone and celebrate when you achieve it. For example, when you’re first starting out, you might tell yourself that if you track everything you buy for a month and then review your budget, you’ll buy yourself a fancy coffee at a café (or another small purchase that motivates you). If you achieve this goal, set another milestone for two months, then four months, etc.
Giving yourself reasonable goals and rewarding yourself for achieving them can be powerful motivation to keep going and to track your spending consistently.