Finances can be a burden when you are just starting to figure out how to manage them. We are an economy driven society and practically everything hinges on your ability to take charge of your personal finances. As children and teens you most likely had somebody else managing your allowance money, and they told you when and when not to spend it. You also probably only dealt in cold hard cash and could see exactly how much money you had left to spend. At some point you may have wondered exactly where you spent your money, however as a child or teen this may not have been a major concern for you. Now that you are an adult, it is vital to know how much money you have and where that money is supposed to go.
Having a budget is a helpful way to know exactly how much money you are spending on a monthly basis. For more information, read about how to create a budget here. Another useful tool to manage your expenses and stick to your budget is to track your expenses. Tracking expenses is a healthy habit to get into early on. Not to forget, the more you track your expenses the more conscious you are of any unnecessary spending you are doing that could hurt your budget later on. Are you spending too much on drive-thru meals? Are you not spending enough on personal care? Keeping a record of what you spend is A1 adult practice.
Tracking your expenses is actually very easy to do. So easy I don’t think I will be able to write an extended post about it. Really all you need to track your expenses is a piece of paper and a pen. You can also use helpful apps on your phone or computer to track your expenses. Apps like Mint will sync up to your bank accounts and update as you spend. Also, depending on your bank they may feature a budgeting app on their website and keep a record on your spending habits. I, however, do not like to use these very convenient apps.
I have experienced that if I am not actively writing my own expenses down then I have a harder time keeping tabs on what and when I spend my money. At the beginning of the week I could start off with $200 and by the end of the week I have only $50 and no idea how I got there. Having to manually track my own expenses every day helps me stick to my budget and recognize when I am overspending. If you have a smart phone or tablet there are dozens of apps that will actually require you to manually enter data into them to keep track of your expenses.
Alternatively, you could also create a spreadsheet on your computer and store it in the cloud to update when you are on the go. And of course, if you prefer to live in an analog world and like to kick it old school there is also the check book register (these used to be delivered with checks, but come on, who uses those anymore?).
You can request to be provided to you from your bank branch. They also sell larger ledgers at office stores (or the office supply section at your super market), or you could print a template online to keep in a budget binder and update every night.
I prefer to use the mobile app Home Budget with Sync. It has both a feature to create a budget as well as a tracking section for expenses and bills. I can also create reports looking back on how much I spent in a given time frame and even sseparate them by categories. There is also a forecast feature to let you glimpse how much income and out-flow you will have, however I do not know yet how to use it. Every time I click on the button it only shows me the current month spending and a dropped line to $0 for the next six months. Anyway, using this app has flipped my overspending habits.
After that brief side track, here are the steps on how to set up your own expense tracker.
Grab your expense tracking method, pen (optional), and make sure you have a quite place to work. Seriously, nothing is more annoying than trying to do something as important as finances and having a Chatty Cathy sitting near you.
If you are using a paper and a pen you will want to draw lines to separate the sections of your expense tracker. If you are writing on a check book register or an expense tracking template than your evening may progress quicker. If you are designing your own expense spread sheet don’t feel the need to get overly complicated or presentational just yet. Simply label your columns with what you intend to track.
The general break down of any expense tracker is the date spent, a description of the item to be tracked, classification on if the item is a deposit into your available balance, a withdrawal (or expense) from that balance, and a total of the available balance remaining. It would also be wise to keep a record of the category each item would be listed under as part of your budget. For example, you could note that you spent a particular amount of money on food, or clothes, or a bill you have to pay each month. Here is an example of an expense tracker that I made on my computer.
I also like to keep a record of the actual date a particular item I am tracking will be drafted on. This works out well for bi-weekly planning according to my pay check cycle. If I know that I am going to pay a bill on a certain date I like to count that bill amount out of my available balance right away rather than assume I have more money than I really do. This prevents me from overspending and getting pinned with over draft fees later on. I will write that bill down in my expense tracker with the date it is expected to pull on and when the payment posts in my bank account I will check off that draft date.
Since I also like to use my Home Budget app I will update my monthly bills section on the date that I am paid instead of the date the bills are paid so that if I need to glance at my phone to see how much available funds I have my balance is already updated to the actual amount I WILL have instead of what my bank account says I have and again avoid overspending and over draft fees.
******Update your expense tracker on a regular basis.*****
Depending on how often you spend money you can either update your tracker as soon as you leave the cashier counter, or update your expenses every night as you wind down your day. Forgetting to update your tracker every night won’t kill you, but if you wait days or weeks to view your expenses and suddenly find yourself out of cash or in the hole, then I don’t have to be the one to tell you where your problem lies.
Every month pull out your expense tracker and make a new record of how much you spent in each category of your monthly budget. Did you stick to the budget of how many times you would go out to eat that month? Did you spend too much on clothes? Are you under budget and able to see how much money you actually make when you don’t over spend?
By keeping a record of when and where you spend your money you are in a better position to under stand your spending habits and if there is something in your spending habits that you may need to work on. If you notice you spend twice as much going out to eat than you do on groceries then you can ask yourself why you go out to eat all the time. Perhaps you under spend on some areas of your life to stay frugal, but after tracking your budget you realize you do have the capability to spend a little extra on those particular items. Tracking your expenses will help you observe where you can shuffle your spending around. If you are living pay check to pay check you can see where you are overspending and what things you can cut from your expenses in the future. Start tracking your expenses today and you will see that understanding personal finances will be something you can check mark off your adulting 101 check list.