Last Updated on June 20, 2020 by Rebecca Lake
Learn why it’s important to know how to track spending each month to manage your budget.
Is your budget a hot mess each month?
If you said yes, there’s probably a good reason: you’re not keeping track of what you spend.
I get it.
Life is busy, you’re busy so who has time to micro-manage every single penny?
But believe me, learning how to track spending can pay off big time if you’re struggling to make (and stick) to a budget.
And surprisingly, 33% of Americans still don’t keep a budget regularly.
I used to struggle super hard with budgeting and saving money.
And I constantly asked myself: what can I be doing better?
It turns out the answer was simple: learning how to track expenses.
5 Ways Tracking Monthly Spending Helps You
Budgeting isn’t that complicated, or at least it’s not supposed to be.
You add up all your expenses, then subtract them from your income each month. Easy peasy, right?
The problem is that your income might stay the same from month to month but your spending may not.
Some months you may spend more because one of your kids has a birthday.
Or your car may need new tires.
And sometimes you end up off-course because cooking dinner at the end of a long day just isn’t in the cards and you go out to eat instead.
But here’s what learning how to track spending does for you.
1. It forces you to take an honest look at your spending habits
There are two sides to the budgeting coin. What you’re spending, and why you’re spending it.
The why is important.
Money itself may not have any emotional value, but spending it does. It’s easy to spend more than you planned to when you’re stressed or tired or just in a funk.
Just FYI, I’m guilty of overspending for those reasons. More than once.
Does that make me a budgeting failure? Nope.
But it does mean that I let my emotions — and not my budget — dictate where my money went.
You might spend because you’re bored or stressed or anxious or feeling down. It’s easy to overspend because of poor planning, too.
When you track your spending, it’s much easier to find the why because you know exactly where your money goes. You can see how your spending choices might have matched your mood or your situation on any given day.
And once you make that connection, you can start making different decisions about how you spend.
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2. It can help you find balance in your budget
A big part of budgeting comes down to separating needs from wants. It’s a lot easier for your budget to get thrown out of whack when the line between them is blurred.
Needs are the obvious things you spend money on each money. That covers:
- Your rent or mortgage payment
- Water and electric bills
- Health care
- Essential clothing
- Transportation and gas
- Cell phone
I also include internet service in this category because I run my freelance writing business online.
My kids are homeschooled so they’re with me 24/7 but you might also add childcare to your list of needs. I’d also put debt on the needs list because those bills have to be paid if you don’t want to wreck your credit.
If you’re struggling with debt, check out Credible for low-interest rate debt consolidation loans.
How are wants different from needs?
The wants in your budget are the things you spend money on that you don’t necessarily need to live. Your list might include things like:
- Eating out
- Streaming subscription services or premium cable
- Traveling for fun
- Trips to the movies, concert tickets and other entertainment
- Getting your hair or nails professionally done
- Gym memberships
- New toys for the kids
- Clothes or shoes
- Furniture or cute accessories for your home
- Treats for yourself
There’s a lot of gray area here and the point isn’t to nitpick. The goal here is to put what you’re spending in perspective.
That’s what happens when you focus on your spending.
You may not even realize how much you’re spending on wants vs. needs but it can be a real eye-opener once you start paying attention.
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3. It can get you closer to your goals
I love setting goals. It’s one of the smartest money habits I’ve adopted.
Think about what matters to you most. What do you want to do with your money?
It could be:
- Paying off your debt
- Getting out of the paycheck to paycheck cycle
- Creating your emergency fund
- Buying a new car
- Saving money for a down payment on a house
- Squirreling away money for your kids’ college fund
- Sending yourself back to school
- Starting a business
- Saving for retirement
You might want to do all these things, or none of them. Maybe your financial goals look completely different.
And that’s okay. We all have big goals we’re chasing. What ties us together is a desire to go after them.
Learning how to track your spending is a huge motivator. If you’re trying to save $20,000 for a down payment on a house, for example, that might make you think twice about spending an extra $20 here or $50 there.
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4. It can help you develop better financial habits
Habits are super-powerful things.
Our habits determine so much of our lives: what we wear, what we eat, where we go, who we’re friends with. And of course, how we spend and manage our money.
When you track your spending consciously and regularly, you’re developing a new habit.
Charles Duhigg, author of “The Power of Habit”, says that habits form when there’s a cue, routine and reward. The cue prompts you to act, the routine is the action and the reward is your payoff.
So what does that have to do with how to track spending? When you know the emotional triggers that shape your spending habits, you can change the routine. And the reward is knowing that you stuck to your budget.
Tracking where, how and why you spend makes that possible.
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5. It helps you to stop stressing about money
Money used to be a HUGE source of anxiety for me. Making a conscious decision and effort to track my spending changed that.
As I got used to tracking my spending, it was easier to break the bad habits I’d fallen into. When I changed those habits, I had more money in my budget. That helped me pay down my debt and start saving.
And let me tell you, there’s no better high than having money in the bank when you’re a single mom.
When life throws a big juicy lemon at you, savings lets you handle it without missing a beat.
And when you have extra cash, you can splurge every so often without feeling guilty — or stressing — about it.
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How to Track Spending and Take Control of Your Budget
I’ve given you some solid reasons for why you should track your spending. Now let’s talk about how you can do it.
There’s no right or wrong way. You just have to pick a system that works best for you.
Need ideas? Here are three (mostly) painless ways to track expenses every month.
1. Write it down.
One of the easiest ways to track your spending is to just write it down.
Get a small notebook you can carry with you. Any time you make a purchase, write it down. Or, hold on to all your receipts and record them at the end of the day.
The easier you can make the process, the better the odds of sticking with it.
2. Use a spreadsheet.
Some people are spreadsheet nerds. I’m not one of them but if you are, this is another option for tracking your expenses.
The great thing about using a spreadsheet to track your spending is that it’s customizable.
You can add different spending categories, remove the ones you don’t need and tweak the fonts to pretty it up.
And, you can use the Formulas function in Excel to easily add up your spending in any given category.
If you really want to get your nerd on, you can use the numbers in your sheet to make charts.
Having a bar graph or pie chart that breaks down your spending can let you see what’s eating up the biggest chunk of your money from month to month.
3. Let an app track your spending for you.
Apps are great for tracking your spending and your budget.
You sync up your checking account or your credit card and the app does all the work of recording expenses for you. There’s no heavy lifting and you don’t have to worry about forgetting to write a purchase down.
There are a TON of apps out there that you can use to track your spending. The big question is, which one should you use?
If you’re clueless about which budgeting app is the best, here are three you can try:
Mint is one of the most popular budgeting apps out there. It’s free, which is great for the budget-conscious, and it’s also super easy to use.
With Mint, you can:
- Automatically track expenses
- Categorize your transactions
- Create spending reports
- Set your budget
- Track and pay your bills
- Check your credit score
You can get a complete financial picture from your cellphone or tablet.
I’ve used Mint before and as the website says, it really is an effortless way to manage your money in one place.
PocketGuard is a slightly different take on a budgeting app.
You can link your checking accounts, savings accounts, credit cards and investment accounts to the app. PocketGuard tracks your spending, and it even updates categorizes your transactions as they happen.
Besides telling you what you’ve spent and where this app can tell you how much you can safely spend after you’ve paid your bills or set aside money for savings.
The app also looks at your finances to find ways to lower your bills and help you find the best bank account for what you save.
Just like Mint, PocketGuard is free to sign up. If you need to be able to track cash in your budget, you can upgrade to PocketGuard Plus.
Just keep in mind that you’ll pay a monthly fee to unlock more features.
Personal Capital lets you do most of the basic budgeting functions you can do with Mint or PocketGuard.
That includes tracking your spending and generating budget reports. But, that’s just the tip of the iceberg.
You can also use this app to monitor your investments, create income reports and track your net worth.
If you’re focused on building wealth, Personal Capital has all the tools you need to create your financial plan.
It’s free to create a Personal Capital account and use the platform’s basic money management tools. There is a fee, however, when sign up to invest through the app’s wealth management service.
Useful Tools to Help You Save More Money Each Month
Learning how to track spending is a step in the right direction for managing your budget.
And while you’re at it, why not find ways to save more money too?
If you need some ideas for ways to save money every month as you track expenses, these tools can help:
Trim can help you root out the smaller charges that are nibbling away at your budget each month.
The Trim Financial Manager reviews your spending and looks for expenses that are costing you money. Things like bank fees or recurring subscription services you don’t need.
If you’re on board with how to track spending and saving, then download Trim to try it out!
Swagbucks rewards you with gift cards and cash for things you already do online.
You can earn rewards by taking surveys, watching videos or just surfing the net.
It’s an easy way to make extra money you can add to your budget.
If you like to shop online then you need Rakuten in your life.
Rakuten lets you earn cash back on purchases when you shop partner merchants online. You can also earn cash back in-stores.
Acorns makes saving money each month stupid simple.
You create an Acorns account and link your bank account. As you spend money, Acorns rounds up your transactions and invests your spare change.
Plus, Acorns will give you money just for getting started. Sign up for Acorns now and get a $10 bonus!
Ibotta is another app that pays you cash back when you shop.
This app is great for buying groceries and saving money on your family’s monthly food budget.
Plus, you can stack Ibotta’s cash back with Instacart or Walmart Grocery if you prefer to do your grocery shopping online.
What’s the hardest part about how to track spending for you?
Whether you write it down, plug your expenses into a spreadsheet or use an app to track purchases, all that matters is that you do it consistently.
Over to you — do you keep a close on where your money goes?
Is there another app or expense tracking system you love, love, love? Tell me about it in the comments!
And please share this post it if you thought it was helpful!