The Art of Tracking Expenses

Ready to know exactly where every cent goes? Discover the art of tracking expenses to build a successful budget and save up to 15% more of your income.

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Leaving behind a guessing game for knowing exactly what you spend, down to the last red cent, and where your hard earned money is going. In order to track your Expenses, you will need to measure in order to manage your finances. Tracking your expenses is a requirement for a successful budget. Studies show that people who track their spending save anywhere from 10 to 15% or even more than those who do not. One of the biggest problems is that most people quit tracking their expenses within two to three weeks, and tracking your expenses for just two to three weeks will not give you proper information.

Five methods to budgeting

1. Apps

Modern budgeting apps like YNAB, Mint, Copilot, Monarch can connect directly to your bank account and automatically categorize your transactions. Some follow a zero-based budgeting philosophy others focus on tracking and alerts.

Pros:
Automatic transmission import.
Real time spending updates.
Charts and reports built right in.
Mobile accessibility anywhere you have service.

Cons:
Monthly fees 5 to $15 a month for premium.
Bank connection can break.
Privacy concerns for some people.
Auto categorization isn't perfect.

2. Spreadsheets like Excel and Google sheets (my personal favorite)

With spreadsheets you get complete control over the structure of your budget. You customize the categories, create your own formulas, and design dashboards exactly how you want them.

Pros:
Completely free if you use Google sheets or older Excel.
Total customization.
No privacy concerns.
An absolutely no need to be online.

Cons:
You have to manually enter the data yourself.
Requires some spreadsheet skills.
Easy to fall behind if you don't keep up with it right away.
No mobile friendly experience, you have to track each receipt.

Pro Tip: when you get home from shopping enter the receipt into the spreadsheet. It will take you no time at all that way.

3. Cash envelopes

This option is best for people that have no self-control when it comes to spending. The envelope system uses a physical cash divide system which places the money into different envelopes that are labeled with that spending category for the month.

Pros:
Impossible overspend.
Gives you tangible and visual feedback.
Absolutely no technology needed.
Can be very psychological powerful.

Cons:
Carrying Cash can be inconvenient for some people.
Doesn't work for online purchases.
You run the rest of theft or loss.
Doesn't give you a purchase history without a receipt.

Pro Tip: with a modern twist: digital envelope apps like Goodbudget and Mvelopes replicate the envelope system digitally. You simply allocate money to a virtual envelope and track the spending can be the best of both worlds.

4. Pen and Paper

A notebook or journal. This would be best for analog lovers. Sometimes as simple as approach is the approach that works best using a dedicated notebook for tracking your expenses forces you to engage with every single purchase.

Pros:
No other cost than the paper and pen or pencil.
Deeply inspirational processes.
Not stuck looking at your screen.
A portability level of 10 out of 10.

Cons:
You have to manually add subtract multiply and divide.
Hard to see trends over any period of time.
Can easily be lost or damaged.
Time-consuming.

5. Bank categorization

This is the best one for minimalist who want just a good enough tracking experience. Most banks out there right now categorize your transactions automatically and provide spending summaries. In my opinion it's not exactly perfect but it's better than doing nothing and requires almost no effort.

Pros:
Completely automatic.
Already built into most banks.
No extra app or tools required.
Normally free.

Cons:
Often categoryized wrong.
You can't set your budget.
Limited customizations.
Doesn't include any cash spending.

How to Choose a Method

Ask yourself these simple questions.
How much time can I commit to my budgeting process? Least time use apps and or banks.
Do you overspend with your credit cards? Try using the cash envelopes method.
Do you like customizing things? Then create spreadsheets.
Are you motivated by aesthetics? In this case you might want to consider the notepad or journal.
How much money can you spend for the tools? For free you want to use the bank or spreadsheets and if you willing to pay for it use apps.

Pro Tip: The most important rule of all is the best expense tracking method is the one you'll actually use. A perfect system that you might abandon after one or two weeks or even a month is worse than a good enough system that you'll stick with for the rest of your life. So start simple and upgrade as you need.

Getting Started Your First Week

Pick a method you don't need to over think it you can always switch later.
Set it up in 15 minutes simply download the app or create a spreadsheet or simply buy a notebook.
Track everything for 7 days, make sure you track everything down to the penny. Regardless if it's just a cup of coffee, subscription or every bill.
Review it on day 7 and then ask yourself if there were any surprises that you didn't realize that you spent so much money on.
Decide whether you want to keep that method or switch to something else but the biggest importance here would be you are doing something, tracking your expenses.

Back to No Fail Budgeting Guide category page to read more.

Disclaimer, Due Diligence Required: Financial markets, tax laws, and economic regulations change frequently and vary by jurisdiction. You should always perform your own independent research, complete thorough due diligence, and consult with a licensed financial advisor, certified public accountant (CPA), or legal professional before making any financial decisions or putting capital at risk. The owners and publishers of this website assume no liability for any financial losses or damages resulting from the use of this information.

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