Knowing where every dollar goes is the first step in getting your finances on a solid footing. Tracking expenses can alert you to habits that you really need to curb. Whatever method you adopt make sure it’s easy to implement and feels comfortable to use. That way, you’re more likely to stay honest about your spending priorities, and learn some fiscal discipline along the way.
Get An App
If you’re comfortable with technology, getting an online expense management tracking tool, like BillGuard, Dollarbird, or Fudget – to name a few of them – probably makes the most sense, according to a Forbes magazine article. Even so, you’ll need to make some basic philosophical decisions about how you go about using them.
Most link to bank and credit card accounts. which is a convenience that most consumers appreciate.
If you’re uneasy about sharing that information, you would do better getting an app that lets you enter it manually, like Dollarbird. You may also prefer to set spending limits by category, or choose the cash flow approach of apps like LevelMoney, which calculate daily, weekly, and monthly totals, after your savings and expenses are deducted.
Keep A Notebook Handy
Old school approaches work best for many consumers, which is why Money Management International’s website recommends carrying a notebook and pen. This way, wherever you go, you can write down each amount you spend. After a month or so, you should collect enough information to work out a baseline budget for ongoing costs like food, clothing and shelter, plus one-time costs that will affect it significantly, such as car repairs.
If you’re pressed for time, you can just collect the receipts, and enter that information into your notebook later. However, that approach also requires a disciplined approach that only you can provide. Keep this factor in mind, should you go that route.
Make A Spreadsheet
The appeal of the spreadsheet method, Business Insider writer Libby Kane explains, is that it allows you to focus on relevant details, without getting bogged down by the process of gathering them up. Using a Web-based application, like Google Sheets, start by creating a column for each month, and a tab for each year. You can add new categories to it as they arise.
Then, every January, plug in your fixed costs for the year ahead, and add them up each month. Seeing spending habits itemized this way, suggests Kane, alerts you more quickly to potential trouble spots that could crater your budget. Once you do see them, you’re more likely to make the adjustments needed to counter the problem. Instead of taking an “out of sight, out of mind” approach.
You can try combining these approaches, too. For example, you can enter receipts into a spreadsheet, or an app. Just remember, though, that consistency is key. What you don’t know about your own spending can hurt you, so don’t get taken by surprise. We can’t all bank on winning the lottery anytime soon, so it’s important that we pay careful attention to our spending and track where every dollar goes. The best financial tracking methods won’t make any difference if you’re unwilling to use them.