It’s a good thing to save money, in order to have some when in a dire situation. If you would like to do so, you need to make a budget and be sure to stick to it. All you have to do is track your expenses, but that can be easier said than done. Continue reading to learn all about the things you need to start tracking your expenses and budgeting.
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Why Track Your Expenses?
A great start is to set up budget lines and assign totals for spending categories. However, you still need to ensure you are holding yourself accountable to stay within the limits. It’s not enough to know where your money should go, it’s also important to put it into practice. To make sure you’re spending as you should, you need to track your expenses.
Ways to Track Your Expenses
Now that you made your budget, you need to track your expenses. Check out four different methods below and choose the one that best fits you.
Pencil & Paper
Besides not needing access to technology, the act of writing things down stimulates your brain. And, an active brain is what you need when you’re faced with a bunch of numbers.
The downside to jotting things down is that by the time it takes you to get to your expense log at home, you might have already forgotten how much you spent at the corner store. Or, maybe your partner didn’t write down a purchase thinking you were going to do it. Any of these scenarios lead to a breakdown in budgeting.
The Envelope System
This tracking method only works if you pay for various expenses in cash, in person. Non-in-person expenses, like mortgage, utilities and whatnot, can be made by checks or by debit card online, but these are easy to track.
At the beginning of every month, divide your income into different envelopes and write the spending category on each one. For example, groceries, entertainment and eating out. When you’re at the grocery store, payout of the grocery envelope, and so forth. When the envelope is empty, that’s when you shouldn’t spend anymore in that category. This way, your money is tracking itself.
The disadvantage to this method is that paying in cash is quite inconvenient these days. Counting out coins and keeping track of them is also tedious.
In this day and age, spreadsheets are everywhere. You can even find budgeting templates online that will do the math for you. If you’re technologically savvy and you’re keen on organization, you’ll want to consider keeping track of your expenses with spreadsheets.
However, there are a couple of downsides to keep in mind. Even if you are all about spreadsheets, your partner might have an aversion to them. Keep open communication with your significant other about your spending, so expense spreadsheets don’t get in the way of your relationship.
Another disadvantage is actually using your spreadsheet to keep up with your spending. If you’re lazy and you don’t get around to it every day, then you’re not really tracking your expenses.
If you often forget to log in your expenses, then you’ll want to consider downloading a budgeting app. Your phone is constantly by your side, so there’s a better chance of you remembering to keep up with your expenses. Which one should you try? Check out The Best Personal Finance Apps to help guide your decision.
If you would like to save your money, you will need to get in the habit of budgeting and tracking your expenses. Just set yourself up with the effective tools of your choice to help set you on the right path. It will all be worth it in the end when you have some extra cash for those rainy days.