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5 Steps to Help You Track Your Expenses

How to Track Your Expenses Numbers on a blue Track

I believe one of the most influential decisions you can make about your money is to track your expenses.  It’s simple and anyone can do it.  Tracking your spending on a monthly basis can give you an accurate picture of where your money is going and where you would like it to go instead.  Simple, accurate, anyone can do it.  

How Do I Get Started Tracking My Expenses?

1. Check your banking and credit card account statements

What’s great about tracking your expenses is you can get started today.  

You only need two (2) type of account statements:

🏦Bank

All of your banking account information will include a ~30 day period of when your bank provides your monthly income and expenses.  Banks either send this to you via mail each month or online via paperless statements.

I opted for online paperless statements because I don’t want to keep my bank records or need to shred them in the future.  Instead I am able to access my bank statements for up to seven (7) years if I remember from my old banking days.

In the case where all of my income and expenses came out of my checking account this is all of the information I would need.

The hardest part is going to be what you need to do with this bank statement:

  1. What did I spend this money on?
  2. What category should I put this expense in? (more on that in the next step)
  3. Tracking your expenses for each month rather than each bank statement, there’s a difference

💳Credit cards

If you use a bank account and a credit card then the same steps will be needed to collect your credit card statement.  The only real difference is that you will need to NOT include the credit card payment on your bank account.  Otherwise this would be counted twice and we don’t want to count any expenses twice.

For example on your bank account statement you might see an expense of a $480.71 credit card payment which is the full balance from your previous month of spending on your credit card.  We don’t want to include this because these are made up of the purchases from your credit card.  Make sense? OK, let’s move on.

2. Categorize your expenses

Once you have all of your expenses now the real fun begins.  You can do this one of two ways and both work just fine.

Now that you have the data it’s important to find out where the money is being spent.  I like to look at things in

  • Months
  • Categories
  • Spending per store

For example in the month of May (Month) I spent $600.21 on Groceries (Category) and my particular spending at Costco (Spending per store) was $421.34.  That’s really all the detail we need when starting out.  

Categories

You can of course create your own categories but usually you can make most spending fit into the following categories:

 

This is a pretty extensive list but I find it’s more important to be consistent with each category than the categories themselves.  

Now here’s the two options when putting your expenses into categories and in many cases I recommend using both as they are both equally useful.

📝Pencil and Paper

It’s as simple as it sounds.  Write down a category like Groceries and begin listing all of the grocery expenses during the month.  Once you have all of the stores, amounts, and dates (optional) add up the total for the month in that category to find out what you spent.

If you have a paper statement printed out I might suggest grabbing a highlighter or seven (7) as keeping track of the expenses and what was added already can be the hardest part to keep straight.

💻Google Sheets or Microsoft Excel

Technology is fantastic.  Have your statement (s) in front of you and instead of hand writing on a piece of paper you can begin to type these same categories in your Google Sheets or Microsoft Excel worksheet on your computer.

I think Warren Buffett & Charlie Munger pass as Nerdy Cool

The benefit is you get your information saved, stored, categorized, and added with less room for human error, but also with the robust capability of colors and graphs.  Nerdy but cool.  Nerd cool.

That’s really everything you need to do today to track your expenses.  Once you have one month you can begin to track your current expenses and see how this compares with your previous spending.  

After you have three (3) months or 90 days worth of expenses you can get a clear picture of your actual spending.  Because while one month is certainly beneficial it’s very easy to spend an unusual amount of money one month like around Christmas time and then have the following months reduce drastically in areas like gifts, food, and travel for example.

Now that you have real transactions and numbers on how much you are spending each month it’s really up to you for the next steps. 

Do you want to spend less each month, save more money, spend less/more on certain categories?

While steps one (1)  and two (2) are proven ways to track your expenses, technology can be a beautiful thing to track your expenses.  

3. Use a budgeting website or app

As a financial coach I don’t actually like budgeting apps very much.  There is this false expectation that by having a budget app on your phone that the person is actually using the app.  Chances are they are not. 

Sort of like having a gym membership.  Just because you have a membership that doesn’t mean you go in and use the equipment.  Gym memberships and budgeting app analogy for the win!

However I recommend using a budget website or app to track your expenses.  Let me explain.

I am a big fan of keeping your finances as simple as possible.  What a budget website or app does is allow you to link all of your accounts in one place.  For me and many of my clients this is magical.  Less moving parts means more focus.  Simple.

By linking all of your accounts to a budget app like Personal Capital (what I use and recommend, plus this link scores you $20 for signing up) this allows me to see transactions have occurred each day.  The transactions also come through with descriptions and categories that are fairly accurate.

By using a budgeting app you have taken out the manual part of going through your bank statements and credit cards.  Save time while you track your expenses, smart move.   What’s also nice is the data automatically provides the following:

  • Date
  • Description
  • Category
  • Amount
  • Color graphs

That last one is my favorite as it’s nice to look back at a given month and see a snapshot of what I spent for the month in a colorful graph.  

track your expenses personal capital graphs

The #1 Tool I use to Track My Expenses and Net Worth

How much time should I spend on tracking my expenses?

What’s important with tracking your expenses is to have a time each week to update the description and category of your expenses.  While technology is fairly accurate it’s not going to be perfect.  

Personally I update my transactions twice (2x) per week.  I take five (5) and update the transactions to keep things accurate and also be on the lookout for unexpected or merchant error in the charges.  I probably spend less than 30 minutes each month tracking my expenses, simple and effective.

Budget Websites and Apps

Emma Watson Instagram

This is Emma Watson she is not a budgeting app, in case that wasn’t clear

I’ve recently come across a budget app named Emma.  While the first thing that comes to mind is Emma Watson instead of a budgeting app don’t be disappointed.

I have been experimenting with Emma, the budgeting app, for a few weeks and I’m extremely impressed so far.  I like Emma so much I’ll probably do a separate write up on the app in the future. They have a free version and a paid version if you are interested.

Track your expenses Emma

Mint is a very familiar name in the budget app and the first one I started using when I began to track my expenses.  Mint is a great alternative to Personal Capital if that fits your needs better as some clients see Personal Capital as an investment app (which it does quite well with investments along with tracking expenses) and prefer Mint.  

The reason I stopped using Mint was the constant ad displays for checking, savings, credit cards, brokerage accounts that I left.  That’s how they make money as it’s a free app, no issues just not my preference.

Those are actually the only three (3) budget websites or apps that I have used and recommend.  I’m very cautious when it comes to platforms I use and recommend so that’s the reason for the short list.

4. Explore other expense trackers

The budgeting apps that I listed are certainly not an exclusive list of budgeting apps or expense trackers available.  I have some clients that exclusively use their credit union which has software that is built into their online banking that tracks expenses and provides the same colorful graphs that a Personal Capital would for example.

It might make sense to start with your current financial institution to see if they have something available.  For example at U.S. Bank I am able to download my current transactions to Quickbooks, Quicken, or Microsoft Excel with a CSV file.

I mention the Microsoft Excel file as there are so many free templates available online.  I prefer Google Sheets myself but they are essentially one in the same with many of the features.

It’s simple to download your transactions from your bank or credit card company and add them to a free Excel or Google Sheets budget template.  You can even make your own which I did, which is used by my coaching clients.

Sign up to get your Free Budget, Track Your Expenses, and Financial Snapshot worksheet.

So many options are available, here’s what I do when working with my coaching clients.

5. Combine Efforts

I mentioned four (4) excellent ways to begin tracking your expenses.  Here’s what I recommend if you want to get serious about tracking your expenses.

  • Use a budgeting website or app to have your transactions automatically loaded into one place
  • Visit this website/app a minimum of two (2) days per week to update your transaction description and categories
  • Every two (2) weeks copy or type the overall spending and add to your personalized Google sheets budget worksheet.

Why should I follow your way of tracking expenses?

I’ll start with it works.  I have tried this with my own personal finances especially when I was paying off over $100,000 in debt.  

My clients start with this same strategy and template because again it works.  Tracking your expenses is really the start of paying attention to where your money is going.

After you have this information it’s up to you to decide what to do with it.

In most cases this leads to a budget or spending plan.  Don’t think of a budget as restricting instead think of a budget as the freedom to spend extra money on what’s important to you and less money on what’s not.

It all starts with tracking your expenses and getting started today.

Ready to take your money to the next level?

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