Have you ever got to the end of the month, taken a look at your bank balance and wondered where it’s all gone?!
If so, you’re not alone.
Whenever I speak to people who want to work on their finances, the main thing that comes up is that they have been overspending, and they aren’t sure on what exactly.
In fact, when I have a session with a new coaching client, this is usually one of the first things that comes up.
Luckily, there’s an easy solution to getting back on track with your finances – and that means that you can start to work towards some fun goals!
In this article I’m going to go through why you should track your expenses, and how to do it:
What Exactly Is Tracking Your Expenses?
You may be wondering what actually is tracking your expenses, and why I bang on about it being so amazing!
Tracking your expenses simply means writing down your spending each day. This may sound tedious but it’s so worth it!
Why You Should Track Your Expenses
Ok, so we’ve talked about what tracking your expenses is exactly, but why are we doing it? This is always helpful to know!
The whole reason to track your expenses is to make sure that you are creating the best budget that you can.
And what do I mean by the best budget? The budget that works for you – and that’s one that’s using your realistic numbers.
One of the most common reasons why budgets don’t work for some people, is that they aren’t using the real numbers.
The thing is, if you aren’t tracking your expenses when it comes to putting your budget together, then you are just guessing at the amounts you think you’re spending.
Whenever I have spoken to my coaching clients about this, I’ve given them an exercise to go and add up all of their spending.
Once they’ve come back to me with their spending all added up…they’re truly shocked.
They had been so adamant that the figures that they were using to create their budget were correct, and just couldn’t believe what the actual spending looked like.
If you then go to create a budget with the realistic numbers that you have been spending, you will be much more likely to have your budgeting go well.
How to Track Your Expenses
So, how to track your expenses?
It doesn’t need to be a complicated process – all that you need to do is write down what you are spending each day.
I have my budget planner that I do this in but you can just use a notebook or whatever you have to hand.
I do suggest doing this by hand at first because there’s just something about writing it out that makes it feel more real and is a good place to start. But if you want to do it on a spreadsheet then that’s fine as well of course!
Ok so you know how to track your expenses now and why you should be doing it. Now it’s time to start actually tracking! I know that this sound obvious but it’s all too easy to just read through an article with good intentions, but not actually action it.
Decide on what kind of method you want to use when it comes to tracking your expenses. Do you want to use a spreadsheet, pen and paper, a budget planner?
It doesn’t matter how you do it – just that you start.
It will really help to have a time of day that you sit down and do this so that it becomes a part of your routine.
The expense tracking that you’re doing is to largely help you to create the best budget that will work for you.
The reason that I say the best budget that will work for YOU, is because everyone is different. Don’t worry about if your budget looks different to anyone else’s – it’s all about what works best for you.
The budgeting method that I use is one of my own invention – The Extra Income Budget Method.
The main benefit of using this budgeting method is that you use any extra money that you get/earn and throw it at your goals. This generally means that you reach your goals faster, and it’s a good motivator!
You’ll want to try and group your expenses into categories to make things easier for yourself. You don’t have to have millions of categories, but you may start out with a few more than you thought, but you can whittle this down as you go.
Some budget categories include things like:
- Health and beauty
What to Do at the End of the Month
So as we mentioned, the whole point of tracking your expenses is to create a good budget. It also helps you to analyse your spending.
The best thing to do is go back through your purchases one by one and do a bit of analysis. This does not mean beating yourself up about the things that you were buying. This is not a guilt mission!
Instead, look at your spending and decide whether you were overspending and if you were, what the reasoning was behind your spending. This will help you make a plan going forward to avoid any overspending.
What Is Your Goal With Budgeting?
It’s going to really help to have a goal that you have in mind when it comes to staying on track with this.
Tracking expenses isn’t the most fun thing that you can do, but it’s a means to an end.
Starting to track your expenses doesn’t mean that you should be doing this for the rest of your life (unless you want to!).
If you just want to do this until you are on track with your budget and spending, then that’s still a great thing to do.
You’re budgeting for a reason. What’s that reason? It could be something like:
- To pay off debt
- To save for a house
- To leave your job
- To feel financially well
Keep this goal in mind and don’t beat yourself up if anything goes wrong along the way. Budgets are not there to be perfect, just to help you make a plan.
You’ve got this!