Spending money can be pretty easy. It’s not hard to drop a few dollars every day on lunch, coffee breaks, or parking without giving it much thought. But if running out of cash before the end of the month is puzzling you, then it’s time to investigate where your money is spent.

Tracking your daily spending habits can be a huge reality check and eye-opener. It’s not uncommon to discover that you’re spending hundreds on takeout or paying huge bank fees every month without even knowing it! So it makes sense to monitor both your earnings and purchases to find where to cut costs, to help build a budget, and to gain some insight into your spending patterns.

3 Steps To Track Your Spending 

Tracking every cent you earn and spend sounds like work, but it’s actually easy to do with the Tracking Expenses Worksheet. If you’ve ever kept a food diary or a workout log then this is the same approach – but for your wallet! The idea is to track your cash inflow and outflow daily to identify the costly culprits. Here’s how to track your spending:

1. Get a notebook. Place a small notebook and pen in your pocket or purse so they are easily accessible, wherever you go. 

2. Write it down. Every time you spend money on something, go ahead and write it down. Do this for every grocery shopping trip, every shoe purchase, and every coffee break – just whip out your notebook and write “Coffee, $2.25” along with today’s date. Asking for a receipt and slipping it into your notebook is also a huge help when tracking costs. 

3. Add it up. At the end of each month, go through your notebook and add up your expenses, tally your receipts, and find out where you’ve spend the most money. Organize your spending under the categories in the Tracking Expenses Worksheet to uncover the real costs in your life. Are you spending too much in the Fun Expenses category and not putting away enough for Future Savings? Here’s how to know which expenses go into each category:

• Life Expenses are your essential needs and include groceries, housing, medical, debt repayment, and transportation. While you don’t have a choice about paying these expenses, you do have some flexibility with how much you spend on them. The lower your Life Expenses, the more money you can spend on fun or save for the future.
• Fun Expenses are the things you want (as opposed to need) and can bring enjoyment to your life. A new pair of stiletto heels won’t pay the rent, but are a shoe-in for a fun Friday night.
• Future Savings is the money saved for your future. This includes saving for your emergency fund, a car, education, and retirement.

It’s a good idea to track your spending over a three month period because daily and monthly expenses can vary. Just be sure to stay consistent and be honest with yourself by writing everything you spend down.

Other Handy Tools 

If a simple pocket-sized notepad is not your expense tracking tool of choice, then try these other methods to stay motivated.

• Cell Phone or Email: Text or email yourself a spending list from your mobile device.
• Personal Finance Software: Update Quicken or Moneydance with your daily expenses.
• Budget Spreadsheet: Use a simple spreadsheet to tally costs, just like in a notebook.

Tracking your expenses reveals your spending habits as they actually exist, not how you think they exist. You can use this information to see expensive patterns, to build a budget, or just to get some insight into where your paycheque goes each month. To stay motivated, try to make money tracking part of your routine, ask for receipts to remember small purchases, and try a tracking tool that works for you.

: 1:51 PM in Personal Finance