Managing your finances is the first step to taking charge of your life, achieving your money goals, and eliminating anxiety. That’s why it’s essential to understand how you spend your money and what you spend on. These can range from do-it-yourself methods or using an expense tracker. Read on to find out how and why you need to track where your money goes.
Why Track Expenses
Do you wonder how you spend your money? That’s one reason you need to start cultivating a habit of financial tracking. When you lose track of how you spend your salary, the chances are that you are spending on the wrong items or using more than you should on other stuff. Having a budget tracker will help you identify the loopholes in your budget, maximize what’s important, and build healthy spending habits.
Similarly, it’s an effective way of getting out of debts. If you know what consumes your money, you will understand its burden on your wallet and whether it’s worth your efforts. Thus, you will decide if you can cut it from your budget.
How to Track Expenses
There are several ways you can use to track what you spend on and how much. You can start by making a budget of everything you plan to spend before you start using your money and sticking to that. Here are ways you can track where your money goes.
Inspect Account Statements
The first step at tracing where your money goes is scrutinizing all your accounts. Ensure that you outline all credit card expenses and checking accounts as well. That will give you a picture of where how you spend the money gets into your account.
Cluster Your Expenses
Once you know what you spend on monthly group the expenses. Typically, you have three types of expenditure, the fixed, variable, and recurring costs. Fixed expenditures are the items that you spend a standard amount on every month. They include rent, mortgage, loans, and utilities.
On the other hand, variables are expenses that have no standard amount and may change every month. These include the money you spend on food, clothing, entertainment, and traveling. Recurring expenses can be either fixed or variable, but they come in every month. Food and rent expenses are examples of regular expenditures.
Once you know how much you spend on each category, you’ll be a step ahead in controlling your expenditures. That will also give you room to make adjustments where necessary. If you use too much on entertainment, you can re-structure your budget and spend moderately on everything. That’s also an effective way to avoid debts.
Use Budget Trackers
Another effective way of tracking your expenditure is using budget trackers. The online platform is bubbling with free budget templates that can help you track your expenses. The spreadsheets allow you to fill in every cost you make daily, and it works out the totals for you. Similarly, you can import your bank transactions if the spreadsheet you’re using allows and track your investments.
If you have a complex financial portfolio, you can consider buying software to help you monitor your expenditure. All these offer you an innovative and effective way to take charge of your money.
If the spreadsheets don’t appeal to you, or you may forget keying in the overheads on your computer daily, expense tracking apps come in handy. These apps allow you to allocate a given amount of spendable income monthly, depending on your earnings and expenses. They are ideal if you are willing to fill in your purchases, allocate time, and stick to the routine.
Identify Your Wants and Needs
If you track your expenditure correctly, you’ll realize many expenses that you make monthly, but you can still live comfortably without. You can then decide to cut them out or reduce how much you spend on them.
Money etiquette is often a challenging subject. If you feel overwhelmed, you should seek guidance from a professional financial advisor or planner to help you take charge. While shopping for the expert, ensure you choose the right financial advisor.