Free Debt Analysis     (888) 986-9939


Best Ways to Track Your Spending

By: kjmena

It’s no secret that our spending habits have a direct impact on our personal finances. Whether you’re getting out of debt or working towards a major savings goal, tracking your spending is the best way to monitor your budget and stick to it. To help you conquer either of these feats, we’ve rounded up the best ways to track your spending so you can get out of debt, save for a big upcoming expense, or simply remain in charge of your finances.

Develop a benchmark from last month’s expenses

Before you start tracking your current spending, get a basis for comparison by reviewing all of your expenditures from the last month. Most people have online access to their various banking accounts, making it easy to find out where your money has been spent. Pull a report from the previous month from each account you use, including checking, saving, and credit cards – it all counts. Then categorize each expense, from fixed bills like housing and utilities, to flexible ones like groceries and going out. You might be surprised to find out how much you actually spend. From there, develop a budget for each category, making sure it doesn’t exceed your monthly income. After all, getting out of debt is nearly impossible if you keep accruing it. Also be sure to set money aside for general savings and retirement; in fact, those things should be a top priority.

Prioritize your expenses

As part of your budget process, it’s important to prioritize all of your financial responsibilities to ensure they are met each month. Essential bills include your mortgage or rent payment, health insurance, and utilities. Take care of those bills on payday to ensure they get paid on time and in full. Next, stash away a predetermined amount for savings or debt repayment. Be sure to make at least the minimum payment on each of your loans or credit cards then work on paying off one in its entirety. You can also set up these payments to occur automatically on payday. Once these major expenses are accounted for you can then allocate your remaining income to take care of the other nonessential categories.

Use the cash advantage

Once you have an amount of money budgeted for each spending category, make a pledge to only use cash for your purchases. The benefit of cash is that once it’s gone, you have to stop spending. Many people use the envelope system, where you divvy up the money into an envelope for each category: groceries, gas, entertainment, etc. This may seem extreme at first, but if you have trouble getting out of debt, you need a drastic behavior change to set you on the right path. You can even write on each envelope how much you should expect to spend each week so that you can pace yourself. Otherwise, you might end up having to take the bus to work at the end of the month when your gas money is gone.

Keep a spending notebook

While you can certainly download a multitude of money tracking apps, sometimes there’s no better method than old-fashioned pen and paper. At the end of each day, take out a notebook devoted solely to your finances and write out everything you spent that day: gas, groceries, bills, coffee, whatever it may be. Yes, it might be easier to scroll through a screen and quickly glance at your expenditures, but the way you spend will carry greater heft if you actually take the time to review and analyze each expense. The wheels in your brain will start turning as you wonder, “Did I really need that? Would that money have been better spent paying off debt?” You may not have to perform this activity month after month, but it can serve as a real eye opener when you first begin tracking your spending.

Review bill statements

It’s important not to assume that each of your monthly bills is automatically correct. While it’s tempting to set up autopay for everything, you still need to carefully review each line item on every bill to ensure you’re not been incorrectly charged. For example, you’ll want to check your credit card to make sure no fraudulent activity has occurred. Look at your cell phone bill for any odd charges like downloads you didn’t authorize. If you find any inaccuracies, call the billing company immediately to dispute the charge. Most companies are very understanding and apologetic if your bill has something wrong with it.

Leave the credit cards at home

This step is particularly helpful if you have trouble staying on top of your cash to debt ratio. While credit cards can certainly be used in an emergency situation, it’s best to remove them from your wallet if you have trouble resisting the urge to use them on a regular basis. This will also help you stick with your all-cash budget. A simple mechanism like this one helps to reinforce positive behavior while helping you to avoid taking on additional debt.

Don’t save your credit card information on retail websites

Our final trick for tracking your spending is to remove any saved credit card information from your favorite online shopping portals. Amazon’s one-click purchase may have been a genius marketing move for the company, but it creates an all-too-easy situation for you to overspend. Plus, while most online retailers boast secure websites, the recent increase of major hacks seeking credit card information should be motivation enough to take off any saved financial information. Set yourself up for success in managing your money by avoiding situations that will tempt you to spend outside of your budget.

Tracking your spending is one of the most effective tools in paying down debt and increasing your savings. You can stay on top of your finances by removing the temptation to overspend, paying off your important bills first, and using the cash advantage to limit your purchases.