How To Track Your Expenses Like A Pro
Tracking expenses is a key step on the path to creating a balanced budget. While expense tracking can be a daunting chore in the beginning, once you’ve gotten the hang of it, you’ll likely find it quite empowering.
Having a clear picture of where your money is going each month allows you to see exactly how your spending is affecting your lifestyle. You can then use that information to make adjustments to help you achieve your financial goals.
So, how exactly do you get started? By following the process outlined below, you’ll be on your way to tracking your expenses like a pro in no time.
1) Review Your Account Statements
Step one is to thoroughly review all you account statements. This means looking at statements from your:
- Checking and savings accounts
- Credit cards
- Retirements accounts
The goal here is to broadly identify where your money is going each month. If possible, gather the last three to five months worth of account statements for each account you have. If nothing else, you need to be able to answer a simple question after reviewing your statements: Are you spending more, or less, than you make each month?
2) Categorize Your Expenses
With all your account statements in front of you, start putting each of your expenses into categories. Some online banking services do this automatically when you use your debit card, which can be a helpful place to start.
The goal here is to figure out which categories are costing you the most money. Some basic categories to start with include:
- Automobile (car payment, insurance, and gas)
- Coffee & Restaurants
- Entertainment (i.e. going to the movies, bowling, etc.)
- Subscriptions & Memberships (Netflix, Spotify, wine of the month club, local gym, etc.)
- Debt Payments (credit cards and/or student loans)
You may not have expenses in every category each month. This is why it’s good to review several months worth of account statements when you start categorizing.
3) Get Organized
Now that you have some actual data to work with, it’s time to organize it in a useful way. If you’re not a fan of spreadsheets, there are many helpful budgeting apps available for both iOS and Android.
If you are a fan of spreadsheets, creating one to track your spending is often the best way to have complete control of how you track your expenses month to month. Programs like Google Sheets and Microsoft Excel include free templates that you can use to get started.
If you have a lot of expenses each month, and tracking them all individually isn’t feasible, you may want to look into a professional solution like Quicken Premier, which can sync directly with your bank account and automate a lot of the process for you.
4) Start Making Changes
Once you’ve got your expense tracking set up, you can start identifying places where you can reduce your spending. This is the ultimate goal of the whole process.
Knowing where your money is going empowers you to make informed decisions. You may discover, for example, that you’re spending a lot of money on coffee and fast food runs each month. Cutting back on coffee and burgers might mean you can start putting that money into a 401(k) account or college fund for your children instead.
Finally, consider speaking with a financial planner if you feel like you’re stuck at any point in the process. Sometimes a little professional help can give you just the right push or point in the right direction you need.
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