Tracking your spending is a very simple yet complex process. On the surface, it seems straightforward – keep track of everything that goes in and out of your household relating to money. But because of the constant attention to detail that it requires, it can seem like an overwhelming task.
I have worked out a method that I use which works for me – but my method is not, by far, the only method. I’m going to explain what I choose to do and why, but also look at some alternative scenarios that may fit your personality and lifestyle better. The important thing is to find the method that works for you – no one method is better than another, some just work better for specific people than others.
There are some elements of tracking spending that are common to any system – a way/place to track the spending, an understanding of what types of spending you do (cash, debit, credit, or a combination), and a method to record these transactions, be it manually or automatically. The simplest (but most labor intensive) way to track spending is to simply have a notebook or spreadsheet and record every transaction as you do it. This is the system that appeals to me, however, I’ve made it a little more technologically efficient. I do almost exclusively debit card transactions as far as spending goes, and I use a spreadsheet for a program called PearBudget as the place to record all my transactions. I collect all my receipts into an envelope by my computer, and then a few times a week I record transactions manually into the spreadsheet. The spreadsheet is organized by month and into categories I choose, and I record transactions into the appropriate column based on type. The spreadsheet does all the math, and keeps track of the totals for each category I preset as well as what I set as my monthly budget for each category. For me, this is a combined budgeting and tracking tool and it works well. I’ve also written some tips and tricks I use to optimize this particular spreadsheet for my needs here.
If manually recording transactions is not for you, there are many different software options that will download your transactions for you. This simplifies things because your “collection” and “recording” process of information is done for you by your bank and/or credit cards. One of the ones I have tried and liked is Quicken, but there are many others (one of my friends swears by mint.com as simplifying and steamlining his whole financial life). Once the program has your financial information (banks, credit cards, etc) it can download your transactions and in many cases tag them as to categories as well. Then you just need to review information and add in any transactions that may not be downloaded (such as cash ones or checks written or received).
If you use cash almost exclusively or a large percentage of the time, automatically downloading transactions may not work for you and you may want to use a manual method. Automatically downloading your transactions lends itself to a credit or debit situation, because your transactions are already digitally recorded. I, however, choose to manually record transactions even though the vast majority of my transactions are from or to my bank account. For me, manually entering receipts makes me more connected to what I spend. I basically have to think about every purchase twice – when I make it, and then again when I record it. this really hels me to keep my unnecessary spending in check, because I am doubly accountable. However, not everyone needs that extra layer of accountability to themselves – as I said, it is what works for you.
Whatever your chosen method, tracking your spending is an ultimately rewarding process, as you learn what you spend and where, and what your choices about money say about your values.