Most people underestimate the amount of money they are spending. That’s why it’s so important to monitor your expenses on a consistent basis. After all – if you want to save money, you need to know how much you’re spending.
The concept of tracking money is pretty straightforward – write down how much money you are spending and what you’re spending it on. Break it down into categories like mortgage, groceries, entertainment, etc. At the end of the month, add up the categories and you’ll get a true picture of where your money is actually going.
While the actual task is relatively simple, it’s the motivation that’s difficult. Many people start out with the best intentions, but then lose focus and give up. We’ve put together some simple tips that will help you track your money and remain dedicated to the task.
1. Create a simple system
Tracking your money doesn’t have to be an elaborate process that involves software programs and difficult formulas. Come up with a simple system that will work for you. This will be different for everyone. Some people prefer to track things by writing expenditures in a daily journal; others prefer an Excel spreadsheet or online tools like Mint or You Need a Budget. The most important thing is to find a system that you’ll stick to and follow.
2. Create customized categories
Don’t feel like you have to fit your expenditures into the standard budgeting categories. Personalize them to better fit your lifestyle so you can group expenditures and track where your money is going each month.
3. Develop a routine
Make it a habit to track your expenses – whether it is on a daily or weekly basis. Just remember – the longer you wait, the more transactions you will have to process.
This will take some effort in the beginning. However, once you’ve made it part of your regular routine it will soon become a habit.
4. Have a place for your receipts and bills
Identify a spot to collect your receipts and bills. This could be an accordion folder in your office, a wicker basket in the kitchen, a simple manila envelope or anything else that you can think of.
5. Partner up
Make sure your partner is on board with tracking expenses as well. In order for you to effectively track expenses you will both need to dedicate yourself to the task.
While it will take some extra time and effort to track your expenditures on an ongoing basis, it is well worth the effort. And if you need extra help along the way, don’t hesitate to meet with a financial advisor or your banker to get some assistance.