Regular tracking of your expenses can provide you with an overall picture of where your money is going. By checking the statements, you can change your financial habits.
In this way, you will also have better control of your finances and make saving money easier to achieve your goals. Here are some of the tips to keep track of your monthly expenses.
Gather Your Financial Statements
The first step is to take an inventory of all your financial accounts. This means gathering statements from:
- Checking accounts: This shows your primary cash flow, including income and direct payments.
- Credit cards: Reviewing these statements is crucial for understanding your spending habits, especially on discretionary items.
Looking at these documents helps you identify your spending patterns. Your spending will consist of fixed and variable expenses. Fixed expenses include rent or mortgage, car payments, insurance premiums, and minimum debt payments. Variable expenses can fluctuate. It includes groceries, entertainment, and clothing.
Categorize Your Expenses
Once you have your statements, it’s time to group your expenses. Categorizing helps you see exactly where your money is going and identify areas where you might be overspending.
A popular and effective method is the 50/30/20 rule, which divides your after-tax income into three main buckets: Needs, Wants, and Savings/Debt.
Use an Excel Bill Payment Calculator
While many people turn to mobile apps, a simple spreadsheet can be a more powerful and customizable tool. An Excel bill payment calculator allows you to design a tracking system that perfectly matches your financial situation. Top reasons to use it includes:
- Customization: You can create categories that make sense for your life, not the generic ones an app provides.
- No Hidden Fees: Many budgeting apps come with premium subscriptions. A spreadsheet is a one-time setup.
- Enhanced Privacy: Your financial data stays on your computer, not on a third-party server.
- Deeper Understanding: Manually entering your expenses forces you to confront your spending habits directly, leading to greater awareness.
Build a Budget That Works for Your Expenses
As you have your expenses categorized, you will be able to create a budget. A budget is not a restriction; it is a plan that allows you to spend. Although the 50/30/20 rule is an excellent method to start, you may discover that alternative approaches better fit your needs, such as zero-based budgeting, where each dollar of revenue is allocated to a purpose.
Monitor Your Progress Regularly
Expenses tracking is not a set-and-forget activity. Consistency is the secret of success. Book an appointment to audit your finances. Take time to fill in the expenses in your spreadsheet. Review your expenses at the month’s end. Give a higher-level look after every three months.
Find Ways to Lower Your Expenses
When you begin tracking your expenses, you will automatically see how you can save. You can save a fortune by cutting your major fixed costs, such as housing, transportation, and food. This can be achieved either through refinancing the mortgage, having a lower insurance premium, or planning your meals to save on grocery bills.
