If you want to win with money, you’ve got to change your actions with money. The way you do that is by making a budget and sticking to it. And the way you do that is by tracking expenses.
This is the secret to taking your budget from good intentions to awesome outcomes. So, let’s talk about how to track expenses in four simple steps.
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How to Track Expenses in 4 Simple Steps
Tracking expenses (aka tracking transactions) isn’t hard—it’s a habit. And just like other important habits (you know, like flossing), it takes some work and repetition to go from trying to remember to do it to doing it naturally. But you’ll get there. And your teeth—and budget—will thank you. Just follow these four steps.
Step 1: Create a Budget
You won’t be able to track expenses without one. What’s a budget? It’s your monthly money plan. When you budget, you give every dollar that comes in during the month a job to do, whether that’s giving, saving or spending.
And listen, budgets get a bad rap. Has anyone ever told you a budget is too limiting? The truth is, a budget doesn’t control you—you control it. It’s a guide you set up to make sure your money does what you tell it to do. So, it actually gives you permission to spend!
Also, if you’re worried about how much work is involved in budgeting, check out EveryDollar! This free app helps you make (and stick to) your budget with ease.
Okay, here’s how you go about setting up a budget:
1. List your income.
List out all the money you plan on making this month. (That means your regular paychecks and any extras like that side hustle!) Add it all up. This is how much money you have to work with this month!
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Got an irregular income? Just look back at what you’ve made the last few months. List the lowest amount as this month’s planned income. We’ll talk more about this in a moment.
2. List your expenses.
Time to plan for everything you’re paying for this month. List your expenses in this order:
- Giving (10% of your income)
- Savings (depends on your Baby Step)
- Four Walls (food, utilities, shelter/housing and transportation)
- Other essentials (insurance, debt, childcare, etc.)
- Extras (entertainment, restaurants, etc.)
3. Subtract your expenses from your income.
This should equal zero. If you’ve got money left over, that’s awesome! Put it toward your current Baby Step (the proven, guided path to saving, paying off debt, and building wealth). If you’ve got a negative number, lower your planned totals or cut extras until you get zero.
This is called zero-based budgeting, and as we said before, it’s all about giving every single dollar you make a job to do. That way, your money’s working as hard as you do.
Now that you’ve set up your budget, you’ve got to keep up with it. That’s where the tracking comes in!
Step 2: If You Make Money, Track It
When your regular paycheck comes in, enter that amount in the income part of your budget. If you make money through a side hustle or you sell something, log that in too!
This step is super important if you have an irregular income. Remember, you planned low when you listed your income. So, if your income turns out to be more than you planned, now’s the time to adjust. You can add money to your current money goals or cover some extras in the budget.
Even with a regular income, track it! For one thing, you can make sure nothing’s off with your paycheck. For another, it’s one more way to get you in your budget (which is always a solid win).
Step 3: If You Spend Money, Track It
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Track every single expense you make. All month long.
When you fill up the gas tank, subtract that expense from your transportation budget line. When you pay the rent, subtract that expense from your housing line. When you buy tickets to see your favorite boy band’s reunion tour, subtract that expense from entertainment.
You get the picture. If money’s coming out of your wallet, bank account, PayPal, cash envelope, coin purse or old-fashioned piggy bank—track it.
As you’re tracking, make sure you’re subtracting too. Then you can see how much you have left in your different budget categories. This is where the magic happens—because this is how you keep up with spending so you can keep from overspending!
Step 4: Set a Regular Rhythm for Tracking
Track your expenses regularly. That might be weekly, daily—or before you leave the grocery store parking lot.
Whatever works for you and gets every expense tracked with no paper receipts getting lost in that kitchen drawer that must be some kind of portal to another world. (How else do you explain the things that go in but never come out?)
If you’re married, make sure you’re both working from the same budget and tracking expenses. This is great for accountability and communication. That way, neither one of you will ever say, “I didn’t know you spent most of the entertainment budget on ziplining tickets. I wanted to sign us up for a couples hip-hop dance class.”
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Category: Finance
