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.

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.

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.

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?