Whether you’re trying to pay down debt, boost savings or simply find more wiggle room in your budget, tracking your spending can help. After all, you can’t reach your financial goals unless you know where your money is going.
It might seem a bit tedious to keep tabs on every dollar and cent you spend. But it can be eye-opening to find that you’re shelling out more—or less—than you thought. Plus, once you make tracking your spending part of your routine, it will become second nature.
Start by making a budget to figure out where you want your money to go each month. Then use one, or a combination, of these methods to keep track of where your money actually is going.
Track with pen and paper
The simplest, but perhaps the most time consuming, method is to keep a running tab of where your money is going. You could carry a small notebook with you to record purchases. Or, you could hang onto all of your bills and receipts to make a weekly or monthly list. There are plenty of online worksheets, including one from the Consumer Financial Protection Board, that you can print out and use to track your expenses.
By recording all of your spending on paper, it makes it easy to see exactly where your money is going. Plus, research shows that writing things down helps you remember those things better. So, if you’re tempted, say, to splurge on a night out, you’ll be more likely to remember if there’s not enough cash in your account if you’ve been tracking your spending in writing.
Use a spreadsheet
A spreadsheet is like a digital version of tracking spending with a pen and paper. The benefit of a spreadsheet, though, is that it can quickly do the math for you to add up all of your monthly spending and subtract it from the income you enter to see how much you have left.
You’ll need to be just as disciplined about recording expenses in a spreadsheet as on paper. However, using a spreadsheet can eliminate the clutter of notebooks or expense-tracking worksheets.
If hanging onto receipts and recording everything you spend seems too tedious, you might prefer tracking your spending by using envelopes. This system works especially well if you’re prone to overspending. However, it does require having a budget in place and knowing how much you can afford to spend on various categories, such as food, gas and entertainment.
Withdraw the amount of cash each month that you’ve allocated for your various budget categories and place the cash in envelopes for each category. For this method to work, you can’t raid the cash in one envelope once you’ve used up all the money from another. You have to stick to the allotted amount for each category. If you happen to have money left over at the end of the month, you can put that cash in savings or toward debt.
Use separate bank accounts for bills, spending and savings
Think of this as the digital version of the envelope system. You might be able to divvy up your cash into categories if your bank offers the option to divide your checking account into subaccounts. Or you might have to open more than one bank account to make this system work.
Either way, you’ll want to have one account for bills and necessary expenses, an account for savings (perhaps a few if you have more than one savings goal) and an account for spending or “fun money.” You can either direct that certain percentages of your paycheck be deposited in each account, or you could have your income deposited into your bills account and have automatic transfers set up to direct funds into the other accounts. The benefit of this method is that you ensure that spending on nonessential expenses never leaves you without enough to cover essential expenses.
Take advantage of technology
If tracking your spending seems like a hassle, there are plenty of apps and services that can analyze your spending for you. Your bank might even offer a service or partner with a platform such as Carefull. You can link bank, credit card and investment accounts to Carefull to see all of your transactions in one place. And Carefull will alert you to changes in your spending, large transactions, possible late payments and other issues that might need your attention.
Regardless of the method you use, it’s a good idea to get into the habit of tracking your spending. This will help you take more control over your finances so that you can get out of debt, save more or have more money for the things you enjoy.