How To Track Your Spending & Why You Should

Tracking your spending is key to managing your money wisely. It’s usually the first thing you are told to do when you get ready to take control of your financial life.

Even though it is important, most people don’t track their spending closely or at all. Most people have a good handle on the monthly bills they have to pay but have no clue about their overall monthly expenses.

It is very easy to reach the end of the month not knowing where hundreds or even thousands of dollars went. Those little items that you buy every day really add up and increase your monthly overall expenditures.

Knowing where your money goes is key to finding areas where you can improve your financial situation. I use apps and my planner to track my spending and it’s helped me identify areas where I needed to cut back and improve my spending.

If you’ve never tracked your spending or do it irregularly, keep reading to learn why you should track your spending and how to do it!

Why You Should Track Your Spending

Unless you track your spending you’ll never be able to recognize where your money is going. Often people in debt have a spending problem rather than an income problem.

At various points in my life before I started tracking my spending, I spent way too much money. I would work for a below-poverty level income but my spending was like I made multiple times that amount. Because I didn’t track my spending I didn’t recognize that the level of money I spent was reckless. Reckless spending over long periods of time can actually ruin your finances and your life, so it’s important to start tracking your spending so you know what is going on.

Until you track your spending you won’t know where you are spending too much money. You won’t know that you spend an extra $500 a month on food eating out or lose lots to little charges and fees all over the place.

You should track your spending so you can recognize these spending traps and places where you are spend too much. Doing so will give you the freedom to make changes that will improve your life and help improve your financial future.

You can’t fix something until you know how it’s broken, right?

How to Track Your Spending

Once your know why you should track your spending, you have to figure out how to track your spending.

There are several ways to track your spending and lots of tools to help you do it. There are many free personal finance tools that lets you track your spending, income, and net worth growth. You can use apps like Mint or even a simple spreadsheet.

If you’re planning to track your spending, here are a few ways to do it:

List your regular monthly bills. These regular monthly bills like your mortgage or rent, loans, utilities, phone, internet, cable, insurance premiums, and child-care expenses. They are the bills you can count on to pay every month. This gives you your
Track your out-of-pocket spending monthly. Use Personal Capital, or Mint, or write it down on paper, but track every thing you spend money on during the month. Keep track of all the money for groceries, gas, meals, clothes, entertainment, personal items, and anything you might spend money on. They all add up so don’t leave anything out.
Review your spending numbers. Once you’ve got a record of where you spent your money, you need to review it and look for patterns and areas to improve. Some money saving tips will be easy to find and implement. Others might involve more work but will be worth it!
Review and plan for big one time expenses. There are several things you need to pay once or even twice a year. Things like home improvements, car repairs, education, furniture, or electronics would fall into this category. Things like this often pop up and land people in debt because they don’t plan for them. Make a list of all these expenses and how much they cost you last year. Reviewing these irregular costs can help you save or plan for them throughout the year.
Create a spending plan. Rather than calling it a budget, you can think of it as a spending plan (much more fun this way). Plan for the big ticket items, monthly expenses, and then what you’ll do with the extra money you have.

Tracking your spending and planning for upcoming expenses will help you take control of your money and feel better about your situation.

My Favorite Ways To Track Spending

There are a ton of ways to track your spending. Below I’m listing some of my favorite options that I’ve either used in the past or am currently using.