Most people know approximately how much they spend a month. Some months may be a little more while December is generally a lot more for most people. But very few people know exactly how much they spend and hardly anyone likes to track their expenses, except a few of us here at Financial Knowledge 🙂
Knowing how much you spend will allow you to save towards those financial goals that are more important to you than an extra cup of coffee on Friday (for example). It is not just how much you spend but where you spend it. Tracking for three months will give you an excellent snapshot of your spending habits and some ideas of where you can trim or spend/save differently.
There are a number of different ways to track. First is the oldy but goody – pen and paper. Writing down everything will make it more real and may, in the future, have you pause before making an unnecessary purchase. There are software programs like spreadsheets that are also very helpful. You will have to create spending categories and spend some time up front.
Many people use an app to track their expenses and there are a lot out there. Choose one that has enough ease of use that you will actually use it. It does you no good to download the app, use it a few times and then abandon it. Some apps will go into your bank account and pull spending information from there. If you use cash, you will still have to manually enter those purchases. Don’t forget to enter items that are automatically on your credit card. Spend a little time in the beginning researching the best app for you and then entering the spending categories.
Track without judgement. Write/enter it all down. Yes, maybe you are embarrassed you spend so much on an evening out or a gift or on yourself. But write it down. If you are sharing this task with a partner or spouse and they are also tracking, give each other a dollar amount that is miscellaneous. This way avoids any finger pointing or eye rolling over spending categories that the other thinks is pointless or doesn’t understand.
And here is the biggest step. You need to look at the aggregate data at the end of every month. Where is your money going? Do you want it spent there? Do you want to spend more in one category and less in another? You get to choose. Knowledge is power.