Where’s Your Money Going? Tips for Keeping Track of Your Expenses

One of the top reasons cited by personal finance experts for not being able to save money is not knowing where your money is going. Regardless of how much you earn, if you don’t know how you are spending your money, you are more likely to overspend, which means less money, if any, is available for savings. The first step to gaining control over your money is to know precisely where it is going. For that, these tips can ensure your success.

Focus on the Goal

According to many of the world’s wealthiest people, such as Warren Buffet, the key to building wealth is to live beneath your means. The goal of tracking your expenses is to help you control your spending so you can spend less than you make and focus your spending on what matters most to you – like reducing debt or saving more.

Use the Right Tools

There is no single best way to track expenses. For some people, a notebook and pen work best because they can have them available all of the time. The entries can be totaled right in the book or transferred to an electronic spreadsheet for easy calculation. The key is to compile your expenditures by categories, such as groceries, dining out, entertainment, essential purchases, and non-essential purchases. You may want to add a category for “impulse purchases,” as that is where many people begin to lose control of their budget.

If you are more technologically inclined, several excellent budgeting tools are available online for free. Some of these tools link directly to your bank and credit accounts to automatically download information. Top-rated programs such as Mint.com do most of the work for you, tracking your spending against your own spending goals.

Use Your Credit Cards

With most credit cards, it is very easy to monitor your spending. You have access to all your spending online, and many accounts will automatically categorize and total your spending. For some people, using credit cards and debit cards instead of cash is a more effective way to control spending, especially when it can be tracked in real-time.

Pay Yourself First

If the ultimate goal is to spend less than you make, the best way to ensure that happens is to make your savings account the very first expenditure each month. That way, instead of saving what might be left at the end of the month, you save based on a set monthly goal and spend what is left over.