You’ve set goals, analyzed your spending habits from the previous year, and created a budget for the year to come. The next step is to keep track of your spending and ensure you don’t go over budget.
To track your spending, every transaction, whether cash, debit or credit, needs to be accounted for. This means everything! If you find $20 in your coat pocket and buy lunch, you need to track it. If you scour the couch cushions for lost change to buy a coffee, you need to track it. Every penny you spend needs to be tracked to ensure you have an accurate picture of what you’re spending, which will also help you budget later on.
There are many ways you can keep track of your spending. Below are a couple of our favourites:
- Create an expense tracker similar to the image below. Record each transaction you make under the expense category it belongs. Each week, total up the transactions and subtract from your monthly budget totals to show what amount you have remaining for the month.
- Create envelopes for each expense category and write the monthly budget on the envelope. When you make a purchase, be sure to get a receipt and place in the correct envelope. Daily or weekly, total up the receipts and subtract the total from your monthly budget amount directly on the envelope.
You can also find a variety of apps and templates online to use. Some even give you the ability to enter your budget and spending and set up notifications when you’re getting close to your budget.
Whatever method you choose, don’t forget to include transactions that may automatically come out of your accounts such as fees, payments, etc. Throughout the month, be aware of how your spending compares to the budget you set. Make sure you know how close your spending is to your budgeted amount. Are you close to overspending? Think about what kind of behaviours, like buying lunch daily, you can change or which categories you can shift money from so you don’t overspend.
At the end of the month, cross reference your expense tracker to your monthly statements to ensure you haven’t missed anything. Then, look at the monthly spending and budgets and analyze how you did. What were your challenges? Were there any categories you thought you’d spend more in than you did? Can any adjustments be made to future budgets?
For example, during your analysis you see that under the fuel category you budgeted $300 for the month but only spent $150. Is it possible you over budgeted? If so, could you lower the amount in future budgets and place the difference in categories that challenged you or to help grow your savings faster?
To be in control of your finances, being organized and consistent is key. Remember to start with goals and look at how you spend your money. Create a budget specific to you and then hold yourself accountable by keeping track of your spending. Remember to review and adjust as things may change.
With Challenge #4 now underway, you’re over halfway done the Kick-Start Your Finances Challenge! Next week, we’ll give advice on some savings tools and techniques that help save time and make a difference when it comes to reaching your saving goals. See you next week!