How To Track Your Spending

Before you can cut your expenses, you'll need to know where your money is being spent on.  That is why there is a need to track your spending.  Sad to say, if you are looking for a shortcut, there isn't one.  You will have to be diligent enough to keep all your receipts and record your expenses.  Here are some tips to make your work easier.

  • Record expenses in a ledger or a notebook as soon as you make the payment.  If you don't carry it with you, keep all receipts in one place and record them later.
  • Not happy with tacking all the receipts in your bag or wallet? Use your phone's SMS service in the meantime, keep a record of the purchases as a message draft and then transfer them later to your notebook.
  • If you have a computer, use a spreadsheet application to record your expenses.  Using a spreadsheet application, like Microsoft Excel, will allow you to compute for sums and averages easier.
  • If your using a smart phone with a spreadsheet application, use that.
Once you've gained the habit of recording your expenses, the next step is to categorize them.  Here are some common categories: Transportation, Phone and Internet, Entertainment and Dining Out, Groceries, Health and Beauty, Clothing, Home (Rent / Maintenance),  and Utilities.

Once you've categorized them, find out where most of your expenses are coming from.  Determine the categories where in you can try and save more.  Come up with a monthly budget and discipline yourself to stick to that budget.  As for unused budget for the month, you can either decide to carry that over to next month's budget or save and invest it instead.

Here are a few tricks to help you stick to your budget:
  • One method is to designate one envelope for each major category of expenses and dole out a specific amount of money into each envelope monthly.  Each time you make a purchase, determine which category it is and use the money in that particular envelope.  If the envelope runs out of money, that means you have consumed your budget and must discipline yourself to abstain from any further purchases for the rest of the month.
  • Another way is to always bring with you your ledger (notebook).  Indicate in a separate column your budget for the month for each category.  Subtract every expense from this budget at the time of purchase.  And don't forget to consult your ledger for the budget's balance before making any major purchases.  (This will be easier if you use a PDA phone with a spreadsheet application but these phones are usually very expensive.  I'm not encouraging you to buy one.  Get one only if you have spare money for it.)

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