How Can I Keep Track of My Spending Patterns?

You Might Be Surprised to See Where Your Money Goes

People creating a personal budget and tracking expenses
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Have you ever tried to lose weight by keeping a record of everything you eat? Sometimes the results are surprising. You may not realize just how many cookies you consume until you track the data. Budgeting is similar. You may not realize how much money you’re spending on coffee, food, or clothes until you track the data.

Logging your dietary habits helps you develop an accurate idea of how many calories you consume every day. Similarly, tracking your spending habits helps you discover how much money you’re spending—which might be wildly different from the amount you think you’re spending.

Tracking Your Spending

Many beginners track transactions for up to a month before they create a budget. This is a good starting point if you've never tracked your spending before. However, monthly spending can differ due to many circumstances, so it is best to continue tracking your spending for much longer.

Once you've created a budget, continue tracking your spending to see how your actual spending habits align with the ideas you’ve outlined in your budget. Budgeting worksheets can help you compare your actual spending against your ideal spending. By tracking your spending and comparing it to what you would like to spend, you'll be able to determine if your budgeting goals are realistic.

Keeping Track of Expenses

The varying methods of paying for items can make tracking your expenses tough. How can a person reasonably keep track of every single cash, credit card, debit card, check, automatic bank withdrawal, and PayPal transaction? One of the best methods is to adhere to a personal budget, and stop using cash (if possible). 

Stop Using Cash

You have automatic, electronic records of every credit card, debit card, check, automatic bank withdrawal and PayPal transaction. The only type of transaction that isn’t recorded automatically is cash.

If you stop buying things with cash, you’ll spare yourself the hassle of manually recording your spending. Instead, you can review your electronic records one day a week and input these records into one centralized location. You can use a spreadsheet, a notebook, or a budgeting worksheet.

Switching from cash to debit and credit only can sometimes be more difficult than using cash, as the temptation to spend more can be hard to overcome.

Some are more likely to spend more when swiping a card than when handing over cash. If you fall into this category, continue paying with cash. ​There’s no reason to put yourself in a situation in which you’re likely to spend more. If you are unable to make the switch from cash, you could try the envelope system.

The Envelope System

The envelope system is an effective cash management system when combined with a budget. At the beginning of each week, place set amounts of cash in envelopes. Dedicate each envelope to a particular spending category, and note the amount you put into each envelope. For example, your envelopes might be labeled “Lunch $25,” “Gasoline $75” and “Target $40.” Since you can’t perfectly predict all your expenses, especially in the beginning, keep one “Miscellaneous” envelope as well.

Over time, you'll figure out what you need for each spending activity. You'll find that spending within budget becomes habit in a fairly short period.

At the end of the week, note the amount you have left in each envelope. Your lunch envelope, for example, may have $5 left. Your gasoline envelope may have $12 remaining. You may have had to use $10 from the Miscellaneous envelope to cover accidental overspending at Target. This is an easy way to track your cash spending. You’ll see your spending habits within broad categories without enduring the hassle of detailing every transaction.

Mark It Down

Keep a small notebook and pen in your purse or pocket, and log every transaction there. You could also log it into an app. The advantage? You’ll think harder about each expense. Writing down every transaction causes you to be more conscious about your spending habits at the moment you’re making the transaction.

The disadvantages? It’s a hassle, easy to slack off or forget, and there’s no way to collect data retroactively if logging expenses slip your mind (unless you religiously keep receipts also). You have to be determined and dedicated to tracking your expenses for this to work.

All methods considered, money management comes down to personal preferences, finding a method that works for you, and making it important by setting goals for your money.

Goal Setting

While creating a budget and exerting the effort to stick to it is a worthwhile endeavor, without an attainable goal for your budget it might become difficult to continue tracking your spending or following a budget. Your goal doesn't have to be a million dollars—goals should be attainable, such as saving for your emergency fund, some vacations, a child's educational expenses, or simply to make sure you have enough money to cover necessary expenses.