Tracking your spending lets you know where your money is actually going. At the end of the month, you’ll know where you are with your finances. That’s what you need to know: how far ahead or behind you are at month’s end.
Most consumers have a good idea about the cost of their fixed monthly expenses – bills that stay the same each month. It’s those expenses that may change from month to month that can be disruptive.
For consumers having a difficult time figuring out where their money goes, there are many ways to track their spending:
When money is spent, write it down right away. Keep a pen and paper in your pocket, car, or purse.
Put receipts in a folder or envelope and add them up at the end of the month. If you didn’t get a receipt, write the amount on the folder.
If you use a large calendar every day, write down what you spend, what bills were paid, and any income received.
Look through your checkbook register for checks and deposits. Or look through your monthly bank/credit union statement.
If you usually spend cash, put your spending money for the day or week in an envelope. When you take cash out, put your receipt in or write your purchase on the envelope. You can also divide your expenses into categories such as “groceries” or “entertainment” if you’re working on limiting your spending. When one envelope is empty, the money has to come out of another envelope. You’ll need to decide what’s most important.
You can design your own. See Libby Kane’s article on Business Insider on how she build a spreadsheet that she’s used for half a decade to keep track of her spending.
Or, you can select from a variety of free spreadsheets offered specifically for tracking your spending. J Money of Budgets Are Sexy analyzes spreadsheets in Excel and Google Docs that may work for you. See his article “Best Free Budget Templates and Spreadsheets” for details.
Money management programs
Mint is one of the best-known free programs for money management. First, you enter information such as banking, credit, and investment accounts. Then Mint begins automatically tracking your money. Standard categories are provided, and you can add others, as needed. You’ll see your cash flow at the end of the month. Other money management programs are Personal Capital, iCash, Goodbudget, and EveryDollar.
Some free apps for budgeting include: Mint, You Need a Budget, Personal Capital, and Every Dollar.
If you need help, many credit unions offer online bill paying, tracking, text messages, online piggy banks for saving money, and other features. In addition, you can get help from the National Foundation for Credit Counseling.
After you’ve tracked your expenses for three to six months, it’s time to do an analysis. If your monthly expenses are usually higher than your monthly income, you have three options: cut back on spending, increase your income, or both.
Developing a budget, based on short- and long-term goals is the next step in getting where you want to be with your money.