Tips to Help You Track Your Spending
One of the most important parts of creating and sticking to a budget is tracking your spending. If you don’t keep track of what you spend your money on, you’ll have no idea where it’s going. If you don’t know where your money is going, you’ll have a very difficult time even making a realistic budget, let alone sticking to it and adjusting it as necessary.
Since tracking your spending is so important, you’ll want to make sure you do it right. Here are some tips for tracking spending.
Use the Method that Works for You
There are many different ways to track spending. Some use a notepad that they carry with them and write down purchases. Others are more comfortable with an app on their phone. Some people save receipts, bank statements, and credit card statements and then add this information to a spreadsheet on their computer when they get home. Whatever method you choose, it’s important that you pick one that is convenient for you. After all, if you choose a method that is annoying, time-consuming, or cumbersome, you’ll be a lot less likely to use it regularly.
Track As Soon As You Can
It’s important to track your spending as soon as you can. This means recording a purchase quickly after making it. Why? Because if you wait until the end of the day to record your spending, there’s a very good chance that you’ll miss something or get something wrong.
Not only will tracking purchases as soon as you make them help you know where your money is going, but it can also cause you to really think about the money you’re spending. A lot of the time people spend money without thinking about it. A few dollars are spent here, a few more there, and you don’t really think of the cost because everything can be bought with a swipe or a tap. If you commit to writing down your spending right after you make a purchase (or even right before) you’ll become much more aware of what you’re spending money on, and this can help you make better decisions.
It’s important that you track every purchase you make, no matter how small or “unimportant” it may seem. That’s because small purchases add up. This is especially true over time. You might think that spending $3 on a coffee isn’t important, but if you do it three times as week, that’s $9. That might not seem like much either, but it adds up to $36 in four weeks or $468 in a year. If you’re not tracking this expense, then you’ll be left with no idea about where you’re spending almost $500 a year.
That’s why it’s a very good idea to track every purchase you make, no matter how small. The individual expenses may not be very large, but tracking them can help you see overall trends, so it’s a good idea to write everything down.
Review Your Spending
It’s important that you don’t just write down your spending and then forget about it. One of the main purposes of tracking spending is that you can go back and review what you’ve spent. How you review it is up to you, but one of the most common ways to is track things by category.
Once a month, group your spending into many different categories (entertainment, food, clothing, etc.) and then add up how much you’ve spent in each one. Then compare this to your budget to see if you’re on track.
Another way to review your spending is to use more personal categories such as “date night,” “work lunches,” hobbies,” and “dinner with friends.” You can then conduct a review and see how much you’re spending in each of these areas.
No matter how you’re tracking your spending, or how you’re organizing it when you conduct your review, it’s important that you compare your actual costs with your budget and that you regularly make adjustments as necessary so that you can make ends meet. If you see that you’re spending much more in one category than you assumed, for example, you can try to make cuts or you can adjust other areas of your budget so that everything balances.