Want to handle your finances like a boss? You’ve got to learn to track your spending.
Just like most things in personal finance, tracking your expenses isn’t particularly complicated. It doesn’t take a genius to do it right. But, implementing those steps can be a real pain – especially if you don’t know where to start.
Thriftaholics, we’ve got your back! Anybody can learn how to track their spending, and all it takes are a few basic items. In the following piece, we’ve outlined 3 different methods for tracking your expenses. At one time or another, we’ve used them all. Check them out, track your expenses, and let us know what you think!
Why Track Your Spending?
Tracking your spending is one of the most important things you can do to improve your financial situation. Whether you’re in debt, learning how to budget, or just looking to maintain a healthy bank account, knowing where your money is going is key to realistically understanding your financial well-being.
By tracking your expenses, you’ll get a clear picture of exactly how the money you make is being spent. One of the things I’ve learned over the years is that most people just aren’t very good with money. Many of them think that, as long as they’re able to pay their bills, they are on budget. Unfortunately, after their bills are paid, those people usually bleed money like a stuck pig. They have no clue where it’s all going.
Welp, that’s just plain silly. If you’re going to supercharge your savings, you’ve got to make better use of the money you already have. Most people have more than enough to get by, they just don’t realize it because they don’t know how much they’re wasting.When you're not watching over it, #money mysteriously disappears. Stop spending. Start living. Click To Tweet
That’s an easy fix: Track your spending.
We’ve fallen victims to this same mindset. We were in debt, making a decent living, but hardly saving, we needed to know the best ways to save money to get a handle on this! In our minds, we were some of the most frugal people we knew. Heck, our wedding even cost less than about $3,000 – total! But, reality showed us that we were blowing money every day on things we really didn’t want or need.
About a year after having our first child, Holly and I looked at each other and decided that enough was enough. We started tracking our expenses and found gobs of money just flying out the window! Our cable bill was well over $100 a month. Our random spending was basically unaccounted for. And the biggest surprise of all was that we were spending over $1,000 every month on food…for 2 adults and a baby. It was ridonkadonk!
We immediately found ways to cut our expenses and continued tracking our spending to keep us accountable. For the first time, we also created a budget. We took the extra money we had been wasting, threw it at our debts, and before long we were debt-free (except the house).
We’ve continued to track our spending and create a monthly budget. Honestly, these two tools have made a gigantic difference in our life. By using them to put our financial house in order, we’ve gained the ability to take risks – risks like quitting our jobs, working for ourselves, and traveling the world…all in a span of less than 5 years.
3 Free Ways to Track Your Expenses
Once we got our money together, you can see that our lives totally changed. It all started when we got serious about tracking our expenses and sticking to a budget. Those two simple tools helped us make the switch from unknowing overspenders to conscious supersavers. We started saving massive sums of money each month – money we didn’t even realize we were wasting.
Tracking your spending will help change your financial life too! Here are 3 legit methods to get this done:
- Pen and Paper – Yup yup! All you need is a pen and paper to make a change right now! I’d use two sheets to do it. We’ll call the first sheet your “Spending Journal.” There, make three simple columns: Name of Expense, Category, and Dollar Amount. (Categories should include things like entertainment, food, savings, etc.) Every time you spend money, jot it down in your journal. We’ll call the second sheet your “Monthly Expense Record.” On this, create two columns: Category and Total Spent. At the end of the month, use your Spending Journal to add up how much you spent according to each category. Then record it in your Monthly Expense Record. Boom! You’ve just tracked your monthly expenses!
- Create a Spreadsheet – An even simpler way to track your expenses is by creating a spreadsheet. You still have to manually add all of your expenses to your Spending Journal. However, the spreadsheet can total your categories for you. That way, you’ll have a rolling total of how much you’re actually spending during the month. We’ve got a budget and expense tracking combo spreadsheet available if you join our VIP Club. Click here to get it!
- Automate Your Tracking – The easiest way to track you expenses is to link your accounts to an automated app like Personal Capital. Once you connect your accounts, the program automatically tracks your spending by store and category. After it’s set up, PC does all the heavy lifting for you. Personally, we use this program all the time. However, if most of your spending is in cash, this may not be the best tracking program for you. That being said, follow the (affiliate) link for more info on Personal Capital’s free tools!
So, you’ve successfully tracked your expenses for the first time. Now what should you do?
Fist of all, congratulations! You’ve already done more to improve your finances than most people ever will. Give yourself a pat on the back for taking action.
OK. With that out of the way, it’s time to do a complete autopsy on your spending. You might find yourself in a little state of shock right now. Those totals can be a bit overwhelming at first. When you’re not watching over it, money mysteriously disappears. It’s a truth we’ve all learned at one point, so you’re definitely not alone.
Freaking out is good! You have cause to freak, but don’t beat yourself up over it. Use that feeling to make some changes to how you interact with your money.
After letting reality sink in, it’s time to look for ways to cut your spending. Comb through your list of expense categories, and determine which expenses are necessary and which aren’t. Be honest with yourself, and determine how much you can trim off that total each month.
There are plenty of ways to save money, such as shopping via cash back sites such as ebates, check out our Ebates Review to learn more, you just need to commit to doing it. Bust out your carving knife, and slice your spending to shreds. Attack your “wants” first. Then, look for ways to trim your needs as well.
To really supercharge your savings, try saving until it hurts. It may be painful at first, but you’ll quickly get used to your new spending habits. And, as your savings begins to grow, you’ll almost certainly love the changes you’ve made!
Keep it up, and do it all over again next month!
Go For It!
Welcome to the first day of your new financial life. You’ve totally got this, and we’re behind you to cheer you on!
We are super stoked to hear about your expense tracking results! Honestly, once you start to track your spending, cutting your expenses becomes pretty addictive. When you see progress, it motivates you to do more and more.
We can’t wait for you to give this a try! It really doesn’t matter which method you choose, just take action. Use any one of these methods to start tracking your spending right away. Once you do, you’ll be well on the way to supercharging your savings!
This is the second piece in our “Supercharging Your Savings” series. Below is a complete list of pieces in the series. Enjoy!