Simple, Effective Methods for Keeping Track of Expenses
Having a budget is a good first step toward financial health, but to make your budget work, you need to be keeping track of expenses. When you know where your money goes each month, it's easier to assess your spending and create strategies to help you save. But how do you get started tracking expenses if it's something you haven't done before?
These steps will teach you the basic principles of how to keep track of money. You'll also learn about tools that can help you automate your expense tracking to make it easier to stick to a budget.
Log your purchases
The first step to keeping track of expenses is finding a system that makes it easy for you to log where you're spending money. It's important that whatever method you choose for logging purchases and other expenses works for you and your lifestyle. It might take trying a few different systems to find the one you can stick with for the long term.
Here are two common ways you can track your spending throughout the month:
- Pencil and paper: If you enjoy the ritual of putting pencil to paper, try creating a dedicated notebook for logging your spending at the end of each day or week.
- Spreadsheets: If you use a cloud-based spreadsheet, you can access it from home, your office or mobile device and track expenses from anywhere.
As you log your spending, be sure to assign a budget category to every expense. This habit will help you reconcile your spending with your budget at the end of each month.
Review your statements
Your bank and credit card statements are powerful tools for keeping track of expenses. Not only are they easy to download and review, these statements also often categorize expenses for you when your bank recognizes a vendor.
Making a habit of regularly reviewing your credit card and bank statements helps you catch recurring expenses you might have forgotten. By setting a schedule each month to check your statements, you can also find recurring billing that happens on a quarterly or semi-annual basis, like auto or life insurance premiums.
Ease your tracking efforts
As you stay diligent about tracking your money, you might find that keeping an eye on of expenses takes a lot of time. The good news is that it doesn't have to, and there are several tools you can use to make this process easier for you.
- Tools from your bank: Many banks offer free money management tools with robust features like expense and debt tracking along with custom charts to help you visualize your spending and savings. Because the software will easily integrate with your bank accounts, tracking your money could be easier than ever.
- Budgeting apps: Whatever your budget, there are apps out there to help you keep you on track. Budgeting apps can automatically track your expenses by connecting your bank and credit card accounts to the app. These apps can also automatically reconcile your spending with your budget at month's end, giving you a spending snapshot to help you make budget adjustments on the fly.
- Budgeting software: If you're looking for a more traditional personal finance tool, try budgeting software like Quicken. You can connect your bank accounts, build a budget, track expenses and even pay bills each month directly from the interface. This a one-time purchase software offers various pricing tiers depending on the capabilities you need.
All these tools help automate keeping track of expenses, taking the guesswork out of your spending each month.
Finally, the most essential tip for tracking your expenses is to build good habits. Having a budget doesn't help if you're only tracking expenses some of the time. No matter the tools you use for keeping an eye on your spending, be sure to set regular review intervals. You might find that it's easy to review your expenses and reconcile your budget on the day you sit down to pay your bills.
Whatever you decide is your ideal review plan, make it a habit, and make it enjoyable. Finding the fun in your finances will go a long way toward sticking to a budget.
A few financial insights for your life
This information is provided for educational purposes only and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. First Citizens Bank (or its affiliates) neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your specific situation.