How to Track Expenses in 3 Easy Steps

Tracking your expenses can seem like a daunting task - adding, subtracting, dividing. But it is worth it. Pinpointing your spending habits will help you discover how much money you are actually spending and on what. 

Here are 3 easy steps to help you track your expenses.

1.Create a Ledger

Categorize your expenses. Take a look at your receipts and invoices to identify what categories your purchases can be broken down into, such as automotive, insurance, travel, and coffee. Some credit cards automatically tag your purchases into categories online which can help simplify this process. Once you identify what you are paying for, identify if they are fixed expenses or variable costs. What fixed expenses - rent, utilities, debt payments, etc. - do you have? Do you need all of them? Can you cancel or shorten any recurring subscriptions? By identifying what essentials you pay for versus leisures, you can budget your spending to allocate funds toward paying off debt sooner or your savings. 

2.Record your expenses in a timely manner

It is tedious to sit down and crunch numbers but in the long haul, it will save you money. Based on your spending patterns you can decipher how often you should record your expenses - daily, weekly, or monthly. For instance, maybe you shop weekly for groceries or get coffee on your way to work several times a week. If this is the case, recording your expenses weekly would be a good idea to see how much you are spending week by week on fixed versus variable costs. Or maybe you bulk buy once a month, in which case you can track your spending at the end of each month. Recording your expenses more frequently will help you identify what you are actually spending and if you need to cut down on any leisurely expenses. 

3.Stick to your spending limits

Similarly how your bank automatically categorizes spending for you, so do many online and mobile applications. By setting up an account on websites such Mint or Quickbooks, your bank accounts, spendings, and any loan debts can be automatically sorted and tracked for you. These tools are great to help you stick to your spending limits and will notify you when you spend over your allotted budget. If you prefer recording your spendings yourself, track weekly so that you do not overspend. If you find that you are spending over your limit in some categories, see where you can cut back for the rest of that month to minimize your chances of spending over your limit.