If you want to save money, then you have to make a budget and stick to it. How to stick to a budget? Easy! Track all your expenses. Well…easier said than done. If you’re a budgeting newbie, fear not. I’ve got all the info you need right here to get you started on a new life of tracking expenses and budgeting.
Why Track Your Expenses?
If you’re making up budget lines and assigning totals for each category, that’s a great start. But what you also need to do is hold yourself accountable to stay within those limits. It’s not enough to know where your money should go, it’s also important to put it into practice. To make sure you’re spending as you should, you need to track your expenses.
Ways to Track Your Expenses
You’ve made your budget. Now you need to track your expenses. But how? Check out four different methods below and choose the one that best fits you.
Pencil & Paper
Don’t knock this tried and true method. Besides not needing access to technology, the act of writing things down stimulates your brain. And, an active brain is what you need when you’re faced with a bunch of numbers.
The downside to jotting things down is that by the time it takes you to get to your expense log at home, you might have already forgotten how much you spent at the corner store. Or, maybe your partner didn’t write down a purchase thinking you were going to do it. Any of these scenarios lead to a breakdown in budgeting.
The Envelope System
This tracking method only works if you pay for various expenses in cash, in person. Non-in-person expenses, like mortgage, utilities and whatnot, can be made by checks or by debit card online, but these are easy to track.
At the beginning of every month, divide your income into different envelopes and write the spending category on each one. For example, groceries, entertainment and eating out. When you’re at the grocery store, payout of the grocery envelope, and so forth. When the envelope is empty, that’s when you shouldn’t spend anymore in that category. This way, your money is tracking itself.
The disadvantage to this method is that paying in cash is quite inconvenient these days. Counting out coins and keeping track of them is also a pain in the butt. My own biggest fear is losing an envelope with a big chunk of my budget in it. Can you imagine?!
Moving on from pencil, paper and envelopes, let’s get into the digital world. In this day and age, spreadsheets are everywhere. You can even find budgeting templates online that will do the math for you. If you’re technologically savvy and you’re keen on organization, you’ll want to consider keeping track of your expenses with spreadsheets.
However, there are a couple of downsides to keep in mind. Even if you are all about spreadsheets, your partner might have an aversion to them. Keep open communication with your significant other about your spending, so expense spreadsheets don’t get in the way of your relationship.
Another disadvantage is actually using your spreadsheet to keep up with your spending. If you’re lazy and you don’t get around to it every day, then you’re not really tracking your expenses.
If you often forget to log in your expenses, then you’ll want to consider downloading a budgeting app. Your phone is constantly by your side, so there’s a better chance of you remembering to keep up with your expenses. Which one should you try? Check out The Best Personal Finance Apps to help guide your decision.
Regardless of the method you choose, you have to turn tracking your expenses into a habit if you want to hold onto your hard-earned cash. Turn a blind eye to spending, and you’ll be scratching your head wondering where it all went.
All you have to do is set yourself up with effective tools of your choice and keep telling yourself that all the detailed work will be worth it in the end. Because it IS worth it!
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