Keep Track of Spending



One of the Best Ways to Manage Money

One of the best ways to manage money is to keep track of spending. It is an essential first step in the personal budget planning process.

Shortly after we were married, my wife and I decided together that we should keep track of spending. Being newlyweds, we were combining our income and expenses for the first time and we wanted to make sure we weren’t spending more than we were earning.

Also, we were contemplating a decision that would cut our income drastically and we wanted to know how much we actually needed for living expenses. We decided to track our spending for a month or two.

That was 29 years ago and we are still keeping track of every penny we spend! Not only did we discover the many benefits of tracking spending but we also found it to be fun!

One of the Basics of Money Management

Tracking your spending is one of the basics of money management. When we first started tracking our spending, we did everything on paper. We used large spreadsheets with many columns. We wrote the date of purchase in the first column and a description of what we spent in the second column. We had several other columns that corresponded to various expense categories. We used those columns to write the amounts we spent.

The paper method worked fine for us for many years. Then, when we purchased our first computer, we did the same thing with an electronic spreadsheet rather than using paper. That made it much easier.

Now, we use financial software. There are many choices for personal money management software. YNAB is an envelope budgeting software that not only makes money tracking very simple, but also allows you to easily allocate how your paycheck will be spent.

Whether you use paper or computer, it is a good idea to get a receipt for every purchase if possible. You can use the receipts as input to record your purchases. Even if you get your transactions downloaded, it is important to verify that the amounts match your receipts. Of course, it is also a good idea to hang on to your receipts should you need to make a return.

Sometimes it is difficult or impossible to get a receipt. For those purchases, carry a pen and paper to write down the information.

Benefit to Personal Budget Planning

Here are some of the benefits when you keep track of spending:

  • Tracking your spending is the first step in the personal budget planning process. Without knowing your current spending habits, it is very difficult to plan a realistic budget. Also, you may be very surprised to find out how you are spending your money.
  • After you have prepared a budget and start to live by it, it is essential to monitor your spending to see if you are keeping on track. Your budget would be useless without your actual spending information. Keeping track of spending is actually more important to money management than budgeting itself.
  • It helps you control impulsive spending. There have been many times where I was about to buy something on impulse, usually a small purchase, when I decided it just wasn’t worth the hassle of remembering to keep track of it.
  • When you have tracked your spending for a while, you can start to recognize trends. Maybe your grocery bill has been creeping up slightly but regularly for the last several months. If you keep track of spending, you can recognize this and further investigate the cause.
  • The information can be sobering. I was shocked to find out we had spent almost $2,000 at our favorite Chinese take-out restaurant in the last few years. Yikes! Cutting back on that was not only good for our pocketbooks but good for my pants size as well!
  • It encourages communication. If you are married, this is a great way to be transparent with your spouse and work together on issues of finances in marriage.

It is a good discipline to keep track of spending. Even though it may seem like a tedious drudgery at first, after a couple of months it becomes second nature. The benefits are well worth the effort.

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