Tracking expenses is one of the key factors in making your budget work for you. If you don’t know how much you’ve spent each month, you won’t be able to tell when you’ve exceeded your limits. Even small expenses can cause you to spend more than the set budget.
Creating an Expense Log
First, you’ll need to have a budget on hand. You should also have a notebook available. You can divide the page into three columns approximately. You’ll need to write each budget category at the top of the column. Then, you need to record the allocated amount next to it. If you haven’t set a budget and are tracking your expenses so you can create one, you should identify basic spending categories such as utilities, food, rent, dining out, fun money, and insurance. Record each of these at the top of the page.
Recording Expenses Throughout the Day
Next, you will need to take time each day to record your expenses. While recording each of your expenses in a specific category, you will need to keep track of the total amount remaining in that category. Simply subtract the amount you spent from the current total, and record the answer. It may be helpful to have two separate columns, one for expenses and the other for the current total. You may also want to record the total in a different color. If you are tracking expenses to see how much you are spending, you’ll need to add the amount you spent to the remaining total. If you are married, it’s helpful to sit down and review how much has been spent each day. This is especially important if you are just starting to budget. It can help you encourage each other while changing your spending habits.
Sticking to Spending Limits
You will need to stop spending when you see that you are spending more money than you have. This is the crucial step in sticking to a budget. You may find that your budget is unrealistic, or you may need to move money between categories. Take the time at the end of the month to adjust next month’s budget so it works for you. It’s important to remember that saving and paying off debt should take priority over dining out and vacations. You will need to cut back in some areas, but you should still be able to eat every day.
Choosing What to Do with Unused Money
At the end of the month, you have the option to roll the remaining money into next month’s category or transfer it to your savings account. For variable bills, such as the electric bill, you may want to roll over the balance to the next month to help even out utility costs each month. For things like groceries, you might want to transfer it to your savings account so you can build your emergency fund or work towards other goals.
Other Options
Using an expense log is not the only way to track your spending. Another option is to use budgeting software or a budgeting system to track expenses. This can save you time and make managing your budget easier each month. There is a wide range of options you can use to manage your money, and it’s important to find the right budgeting program for you. In fact, you’ll want to find something that works across platforms and syncs with your bank. If you are married, you’ll want something that allows both of you to input expenses on the go, making tracking spending much easier.
You can also switch to cash-only for categories you spend a lot in each month (for example, groceries, dining out, and entertainment categories). You will set up an envelope for each category and put the amount allocated at the beginning of the month. When you go shopping in those categories, you’ll take the envelope with you. You can keep the receipts in the envelope so you can check at the end of the month to see how much you spent.
Questions
Frequently Asked Questions (FAQs)
Why is it important to track your spending?
It’s easy to spend more than you expect when you’re not paying attention. Long-term financial health requires a lot of careful planning and discipline, and tracking your expenses helps ensure you’re on the right path. Otherwise, you’ll always be looking in the mirror wondering where your money went.
How can I take control of my spending habits?
Tracking your expenses is the first step toward taking control of your spending habits. Once you know where your money is going, you can determine which categories don’t align with your long-term goals, set a budget for those categories, and put any necessary barriers around your spending. New habits may include using cash only, shopping with a list, or eating out less.
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Source: https://www.thebalancemoney.com/how-to-track-your-expenses-2385695
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