It’s not glamourous, it’s not sexy but it is a central and important tip to help you get your arms around what flows through your bank account. I’m talking about tracking your expenses.
Tracking expenses should be your first step to putting your finances in order. You need to know where you are starting from before you can make an action plan for your money. While you may have expenses that are fixed, like rent or a monthly gym membership, there are other areas where you may be spending more money than you realize, like food and entertainment. Tracking your expenses will provide a clear picture showing you where your money is going.
You don’t need any fancy tools to track your expenses – just a small notebook and a writing utensil to record everything you spend. If you don’t care for the old-fashioned method, you can use a notes app on your smartphone to record your expenses as well. Writing or typing all of your spending makes the connection in your brain as to when you are spending and what you are spending your money on. It’s similar to tracking your eating when you are tracking calories – when you bite it, you write it. Forcing yourself to write down every transaction slows down the purchasing process and allows for pause and reflection with your purchases. In fact, you may find yourself thinking twice about spending money when you begin writing all of your purchases.
Commit to recording all of your purchases for 30 days. This will give you a full month’s worth of expenses to include items that are monthly, like your utilities. Begin reviewing your purchase log after a week. Hopefully you will start to notice spending patterns and it will help you to target spending categories that you may be spending more money than you thought. For example, those $1 bins at Target are like candy for adults. Do you suppose this may be where some of the extra $50 everyone talks about spending at Target goes? Tracking your purchases will help curb that impulse buying and it will be much easier to start making impactful changes.
Tracking your expense for 30 days is a great exercise to do even if you have been budgeting for a long time. It helps to reign expenses that you might have gotten a little careless with, like eating out or entertainment. It’s also helps to re-evaluate how you are spending your money and what expenses could be reduced or eliminated from your budget. It’s always surprising to discover how spending has changed from that initial tracking to what you are currently spending.
Knowing where your money is going right now is the best way to know how to move forward with a plan for your money. You will probably be surprised what you find out about your spending habits. Have you tracked your expenses before? What was the biggest thing you learned? Share your experience in the comments below!