Keeping Track of Your Expenses and Why It’s Important

Managing your finances often starts at college. Regardless of whether it is when you enroll for classes in your freshman semester or when you graduate, you are forced to take on the challenge of your finances as an adult. It’s often the balancing act of knowing how much you are earning in comparison to how much you are spending. Knowing how much you earn is often the easiest part. Keeping track of expenses is the hard part.

Whether you want to admit it or not, you purchase a lot of things over the course of the month. Whether it’s a pack of gum at the convenience store, ice cream on a hot summer evening, or your groceries. My wife and I average about 40-50 transactions each month on our credit cards. Most of our friends average more than that. Spending money is an everyday part of life and you need to learn how to keep track of it.

Keeping track of expenses

How to Keep Track of Expenses

There are many ways that you can use to keep track of your expenses. Many of the most popular ways have even more forms as everyone seems to personalize their own form of tracking the outward flow of money. This only makes sense. People have different personalities and different spending habits, so why abide by the same system to track it? Here are the three basic ways of monitoring your spending:

The Diligent Paper Trail:

One of the most basic ways to keep track of what you spend each month is to write down each and every transaction while it happens. This has a lot of advantages. It ensures that you do not miss a single transaction, allows you to confirm that the credit card statement matches your records, and allows you to easily total how much you have spent in that month at any given point. If you are ever wondering how much money you have left in a given month, there’s no need to guess. If you want to do the work, you have the tools at your finger tips. This type of monitoring gives you peace of mind knowing that you did not miss anything.

The problem with this method is the time investment necessary. We are all busy creatures and if I had to guess, the people who do not keep track of their expenses fail to do so because it takes time. If you are seriously considering this option, you need to ask yourself if you are going to be diligent enough to write down every transaction. If you are going out on a date, are you going to interrupt the flow of the evening to write down how much you are spending? If not, will you remember to do it that same night before you forget the total?

The Technology – Using Credit Card Statements

Another way to keep track of your expenses is to use your credit card statements to track your spending. Unlike the old-fashioned option mentioned, this utilizes some of the technological resources available to you. At the end of each month, you can use your statements to add up how much you spent for each category (i.e. housing, transportation, etc.). In case it isn’t obvious, this method requires you to use your credit or debit cards. Otherwise, there would be no trace of your spending.

This method excels where the previous one fails. It allows you to enjoy each and every occasion without having to obsess about writing down each expense. This is a huge benefit. Yet, it isn’t without it’s own faults. While it may allow you to easily keep track of your credit card spending, it still requires some additional work to keep track of cash purchases. Can you handle juggling this balance? The other downside is that it generally requires a couple hours of work each month. Will you have the patience to add up each category each month? Or will you give up?

The Easiest, Fastest Option – Personal Capital

The third alternative, which utilizes technology to its fullest is a free online service. Personal Capital is one of many online services that helps you keep track of your expenses. Instead of having to write down each transaction or add it up at the end of the month, why not have a computer software do it for you?

There are many reasons why I think Personal Capital is a great option to monitor your spending:

  1. It requires very little time for you to keep an eye on your spending. This means more free time for you and a greater chance that you will stick with budgeting. Budgeting doesn’t have to be time-consuming to be effective.
  2. You can connect multiple accounts to it, so there is no need to login to multiple accounts. It’s all in one place.
  3. Easy-to-use analytic software, including the ability to create graphs and charts. If looking at numbers doesn’t give you a whole picture of where your money is going, why not use Personal Capital to create fancy charts to better understand your expenses.
  4. It’s secure – while some people may be worried about connecting multiple accounts to one place, it offers the same level of protection as online banks. How’s that for secure!
  5. Did I mention that it’s FREE? While other services make money off of membership fees, Personal Capital makes its money on promotions. That means its free to use for those who just want a tool to track your spending.
  6. You can also monitor your investments.

Personal Capital

Why You Should Track Your Spending

Understanding why you should track your spending is different than actually doing it. Some young adults start monitoring their expenses in order to please their parents or because they think it is what you are supposed to do. It is not uncommon for people to do this without understanding why it is important. I generally think that understanding why it’s important is crucial. If you aren’t sure why you are doing something, you will often stop.

It’s YOUR Money:

The first major reason why I think everyone should track your spending is because it is your money. It isn’t someone else’s that you can just throw away without any consequences. It is your money that you earned through hard work and determination. Just like anything else in life, keeping a close eye on the things that matter in your life is essential. If you are growing a garden, you realize that it takes a little time and focus to grow it. It’s not going to happen without the attention necessary. In the same way, paying attention to where you spend YOUR money is a natural part of being responsible with your finances.

Not only is it natural to pay close attention to where you money goes, you need to make sure that no one is stealing from you. While you may think that no one would cheat you (because you wouldn’t cheat anyone else), this is far from the truth. It was just a couple of months ago that I discovered a $100 charge on my credit card bill for a rental that the repair shop was supposed to pay for. If I hadn’t been paying attention, I would have paid it and no one would have blinked an eye. People’s credit cards are compromised everyday, so you never know when a fraudulent charge will come up. If you’re not paying attention to the bill, you’ll never even know that someone is cheating you.

know where you are spending your money

If You Want to Do Something Differently With it, It STARTS with KNOWING Where It’s Going

If you have recently found out that you are throwing your money away AND want to change, it first has to start with where you are spending your money. Did you know that a lot of people can not answer how much of their budget they are spending on food or transportation? The easiest way to go into debt is to stop paying attention to where you are spending your money. The alternative is also true: a great way to save money (whether it be for vacation, retirement, or a new car) is to start tracking your spending. Once you do this, you will be able to limit yourself next month.

If you want to start taking charge of your finances, start paying attention to where you are spending your money. Technology has made it significantly easier to track your expenses then ever before, so there’s no excuse. You have the power to change your financial situation today.

Do you keep track of your expenses on a regular basis? If so, how do you do it?

18 Responses to Keeping Track of Your Expenses and Why It’s Important

  1. Jessica says:

    I keep track of my expenses using the credit/debit card statement method. I’ve used Mint in the past, but since I used to split utilities and other bills with roommates, Mint’s calculations didn’t truly reflect my spending.

    • Corey says:

      That’s a good point Jessica. Would it be easiest to use mint and then take the totals to a spreadsheet?

  2. In college, I didn’t use a credit card at all. I didn’t have any money and avoid pretty spending at all cost. I rarely went out to eat or buy any food or snack on campus. These days I keep track by using credit card and a cash allowance system. We get $75/week each to spend on whatever we want. Well, that includes groceries and other baby expenses too. That way, we don’t have to feel guilty about spending money.

    • Corey says:

      That’s a great way to limit your spending. Do you ever save up that money to buy anything big? Like a nice date night in the city?

  3. jefferson says:

    even though it goes a little bit against the advice of some of the financial talking heads, we decided to go all-electronic and zero cash with our spending.. this allows us to track all expenses and to truly see where our money is going.

    mint.com is a phenomenal tool, and we certainly use it to its fullest!

    • Corey says:

      That sounds like a great idea. We usually only use $40-80 in cash per month and a lot that is laundry, so it’s easy to keep track of.

  4. Christian L. says:

    Corey,
    Call me old fashioned, but I stick to receipts. Yesterday I ran several errands, looked at my receipts after each purchase and then totaled it up at the end of the day.

    Before I went out, I had a budget in mind. I only broke my budget by a few bucks, so I was pretty pleased.

  5. I keep all of my receipts (even the small purchases, ie McDonald’s coffee) and plug everything into an excel spreadsheet. Ever since I started tracking my expenses it has become such an eye opener. The numbers don’t lie in terms of what you spend most of your money on. It makes me feel more in control of my money too.

    I mostly use credit cards for my purchases and only use cash for things like haircuts (my hairdresser only accepts cash) and laundry.

  6. I’m a big fan of the Excel/Mint combo. Also, I use a certain card for specific transactions – AmEx for auto, Discover for dining/entertainment.

  7. I do keep track of my finances! I’m posting my school expenses on my new blog to help other teens see that there is a way to get a college education without taking out student loans. We have been fed the lie that school loans are the only way to get a degree.
    Chase

  8. Untemplater says:

    My credit card statements are now linked to a set of reports online that show me how my spending breaks down by category. The bucketing isn’t always right so sometimes I download the data so I can re-categorize a few things to get a better idea. Getting into the habit of tracking expenses has so many benefits, and the earlier people start, the better off they’ll be.

  9. I keep track of my expenses using my credit card and debit card statements. While my hubby loves Mint I find that I enjoy my own little simple excel sheet better, but honestly, I probably have not spent enough time with Mint to fully grasp the greatness!

    I am always astounded at people who don’t keep track of their money and who don’t know when bills and different things come out. I feel like I am always thinking one or two weeks in advance, mentally checking when certain bills are being deducted so that I don’t get an unwanted surprise!

    Best,
    Cat
    aka
    Budget Blonde

  10. [...] Easy to Judge, Hard to ChangeIt’s very similar to being frugal with your money. If you are keeping track of your finances, you may know that it is better to not go get ice cream on a hot day, but it’s much easier [...]

  11. John says:

    Great article. Tracking how you spend your money is especially important these days. Far more payment methods exist today than did a generation ago and many of these new methods are fast and easy. Obviously, merchants want you to be able to pay them as easily and quickly as possible. As a result, you can easily lose track of how much you spend. Budget is NOT a dirty word. Track your spending.

  12. With out tracking the expenditure you can dread of a worry free future.

  13. Stacy Barbee says:

    Well, keeping track of the finances is evidently important, Not only does it help to secure your present, it can also assist you to prepare for the future. Controlling your expenses today can help you save. Consequently, during emergencies or unexpected misfortunes like job loss etc., the saved resources can be used. This way, you can avoid taking out new loans or using your credit.
    I personally prefer noting down the expenses on paper at the end of each day. That way I can count how much I have spent on a single day and try to spend less on the next one. Sticking to a daily budget is difficult, and that’s the reason why I leave a little room for luxuries in my budget. It helps me to stick to the plan (more or less), instead of being frustrated and giving it up altogether.

  14. [...] people still live from paycheck to paycheck, it has never been so clear that everyone should be implementing a budget or savings plan, to counteract any unforseen expenses. Being prepared is the best thing that you [...]

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