Tracking Expenses: Your First Step to Financial Freedom

Expense Tracking: Let's Get Started!

Welcome! This is my first post, but I've been doing the frugality thing for awhile. As I was brainstorming frugal topic ideas, I remembered that the first step I took in my journey was simply learning to track my expenses. It's something I found immensely helpful, and I hope you will too!

Why Track Your Expenses

If your finances are in trouble, you need a clear picture of your current situation before you can fix your problems. Think of financial woes as the disease. Expense tracking is like the diagnostic tool that allows you to pinpoint right where things are going wrong. It's an x-ray of your finances.

No Judgment: Just The Facts

When you start tracking your expenses, you may find some things that make you feel guilty or even foolish. Don't let the process get you down. You are taking an important step to getting control over your finances. You should be proud of that.

How to Track Your Expenses

Choose Your Methods

There are a few approaches you can take. I used a hybrid approach.

Manual Tracking

Just like the heading implies, this is tracking your expenses manually in some sort of notebook or tracker. I used this for cash expenditures and for my day-to-day spending. You can enter in your spending as you go, or save receipts and input things later on. I added things to an expense tracker throughout the day, and then added it to a spreadsheet after I put the kids to bed.

Budget Software

There are plenty of great budgeting tools available. Some are free. Others cost a bit to use. Shop around to see what works for you, and take advantage of free trial offers. I have friends who love Mint, Quicken, and YNAB. I keep it simple with a spreadsheet that I have modified over the years. 

Banking Tools

Get to know your banking website and app. There may be built in tools to help you stay on top of your spending.

Yes! You Have to Track All of Your Expenses

When I started tracking my spending, I was shocked to learn that I wasn't broke because of expensive meals or shopping sprees. I was quite literally using up all of my spare money less than $5 at a time. It was the little snacky item from the dollar menu, the cheap little toy at cash register to placate a squirming child, and other impulse purchases that just seemed so insignificant. I was spending up to $10 per day, seven days a week. That's $70 on things that weren't memorable or satisfying.

Track Your Spending For a Month

You need to track your spending for a full monthly budget cycle. This ensures you record your daily and weekly spending, rent/mortgage, utilities, and other bills. It's a drag, but when you're finished you will have some fabulous financial insights.

Next Step! Spending Categories

Now you have all of this information. It's time to create categories. Here are some that I use:

• Mortgage
• Electric/Gas
• Weekly Groceries
• Clothes/shoes
• Gasoline
• Dining out
• Entertainment
• Car Repairs
• Vet Bills
• Water/Sewer/Trash

At this point, you may see some patterns, and some opportunities to make changes. That's great! The most important thing for you to do right now is just feel proud of the progress you've made. You've been honest with yourself, stuck with a not-so-fun task, and now you have a better picture of your finances. That's the first step to achieving your financial goals.

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