Six Ways to Track Your Expenses

Six Ways to Track Your Expenses

The secret to financial stability is being wise with your money. Many people give money management very little thought. They spend based on what they consider to be safe and find out too late they are in debt over their heads. Money management is more important than ever as the cost of living continues to rise. Learning to spend less than you earn each month can make a world of difference to your credit rating, financial health, and peace of mind. To enjoy financial “well-being”, it takes some artful budgeting to ensure your spending habits are aligned with your earnings. You can, therefore, avoid the need for bankruptcy counselling.

Here, we explore six ways to track your expenses, so you always remain ahead of the game and can meet your long-term financial goals.

1. Keep debit records

Debit makes it more difficult to track your spending. When you use cash in hand for purchases, you have something tangible you can count and see disappear. However, with debit, it just takes a swipe and barely a glance at the money you are withdrawing from your account, which makes spending far too easy. In order to get a better handle on your spending, you should keep records of every penny. A good way to do this is to always ask for a receipt. It’s a pain to carry them around, but you can place them in an envelope or folder at the end of the day at home. You can then add them up at the end of the month.

If you don’t like this idea, you can also review your withdrawals and transaction in your bank account online. You will begin to see how often you are using your debit card and determine if your spending is out of hand.

2. Review your credit statements

As with your debit spending, keeping an eye on your credit spending is very important. First, you should never blindly pay off credit. Look for discrepancies due to the threat of fraudulent spending. Second, make sure you understand your balance, watch for how close you are getting to your limit, and see if you can make payments higher than the required monthly payment. This helps to keep your debt ratio down. Again, look for big spending to determine where you might need to cut back. The less you are spending on your credit cards, and the lower your balance, the less you have to spend!

3. Address overspending

As you do your monthly account reviews, look for overspending. An easy way to do this is to set up categories of spending so you can look for opportunities to cut back. This would include your necessities such as rent or mortgage, utilities, food, transportation, etc. You can then add other categories such as:

  • Entertainment like dining out, movies, concerts, bars, etc.
  • Fitness such as gym memberships.
  • Wardrobe.
  • Personal care such as hair appointments, nail salons, and massages.
  • Health care such as chiropractors, prescriptions, dentist appointments, etc.

With your categories set, you can take note of the money you have to spend each month and look for areas where you can save money. Categories such as entertainment or wardrobe can be easy to cut back on. Often, your grocery bill can be a bit of a surprise, especially if you tend to shop several times each week, instead of one big shop once a week. You can set a budget for areas where you are overspending, and when you reach your limit, stop spending in this category.

4. Use a consistent tracking method

Whether you find that the receipt or electronic tracking system works better for you, be consistent. If you flip flop, you are more likely to miss something when you are tracking your spending. If you decide to switch methods, wait until the next month to avoid confusion.

5. Lay it out

Because your spending will appear in different forms, such as credit, debit, or line of credit, you should have one central place where you lay out all of your spending. Without this, you won’t get a true picture of your spending habits. You can choose an old-school ledger where you record things by hand, set up a spreadsheet in Excel, or choose one of the many financial tracking apps available. Be consistent in recording your spending each month to make sure you are as accurate as possible. To be even more efficient, you can set up a formula that allows you to enter your income and deduct your spending entries. You can see when you are coming dangerously close to your limit and react before you have to resort to credit!

As a side note, most banks will provide you with some sort of tracking option. For example, RBC provides a pie chart that shows you how much you are spending in each area.

6. Ask for advice

Once you see how your spending is going, set a budget to avoid future unnecessary spending. Speak to a financial counselling professional, such as a Licensed Insolvency Trustee, to ask for advice and to help you set up an effective plan. The more you owe, the more urgently you need advice. A good financial management plan will allow you to find ways to cut spending. In addition it will help by providing an effective savings plan to help grow your wealth.

By adopting these tracking methods, you will begin to gain more control over your finances. You can look for opportunities to save, pay down your debt more effectively, and perhaps most importantly, avoid unmanageable debt.

At Kevin Thatcher & Associates, we offer assistance for financial management and bankruptcy counselling that Ontario clients need to get their finances back on track. Contact us here for more information.

Speak to an expert today.