KEY TAKEAWAYS

  • Expense tracking helps you understand where your money goes.
  • Tracking expenses can reduce overspending and impulse buying habits.
  • Fixed and variable expenses help organise your spending categories.
  • Daily expense tracking gives a clearer picture of spending behaviour.
  • Expense tracking supports budgeting, saving, and money management.

Introduction

Today, overspending is the major problem in every lower middle class family. Whenever we see an offer, discounts , cheap services or products we purchase them without thinking a word and after spending the full salary as a result even we forget where we spend it.

Why do we spend? and how much do we spend?

Today we will discuss how you can track your expenses to get rid from overspending and to manage your money as a professional.

What Is Expense Tracking?

Expense tracking is recording and monitoring of money you spent, in other hands it means tracking of that money you spent.

For instance, Mayank purchases ₹5999 cooler, ₹799 charger, ₹2000 food/fruit. He wrote each purchase in his copy where he recorded his spending. Can you understand how Mayank tracks and records his expenses, This is a fair explanation of expense tracking.

"Expense tracking is the process of recording, organizing, and reviewing all spending activities to understand where money goes, manage budgets better, and maintain financial control."

Source - Wikipedia



Instead of searching savings tips , budgeting tips , etc. first you must understand how you can track expense

Why Tracking Expenses Is Important

Expense Tracking is essential because -

  1. It shows where you are spending your money.
  2. Help to prevent over spending.
  3. To get rid from unnecessary spending, spend tracking helps.
  4. Expenses tracking provides you a clear result of your expenses that helps you to prepare your budget and plan savings.
  5. Additionally, over a time it helps to decrease the habit of impulse buying.
  6. It also helps to plan your Emergency Funds.

How to Track Your Expenses Step by Step

You can start tracking your expenses in a notebook or you can use many apps like money manager, etc.

Below is the step by step guide of how you can track your expenses -

1. Note your Income first

Firstly you should note your income so that you have an idea of how you should spend your money.

2. Identify your expenses

First you must identify your expenses. This is because you are going to manage money therefore, you must understand first what are expenses and which are their type.

Types of Expense

There are mainly two type of Expense

Fixed Expenses - Mostly these expenses are fixed usually they appear the same every month time - Electricity Bill, Room Rent, EMIs ,etc.

Variable Expenses - These expenses can change any time like food, travelling, clothing,etc.

You should categorise your expenses on behalf of these.

3. Note expenses on your notebook

Note your all expenses in your notebook, in two categories fixed and variable expenses generally, you will see fixed expenses are the same every time or sometimes a slight change.

track your expenses


Remember that you must record your all expenses whether it is ₹1 toffee.

4. Categorise your Expenses

After recording all of your expenses you must categorise them like Food Expenses, Travelling Expenses, Clothing, etc. to ease your work.

5. Track your Expenses daily

Once you start tracking your expenses, you will need to track your expenses daily to get a clear result. Even if they are in small amounts like ₹2, ₹1 you should track everything.

6. Review your Expenses weekly or monthly

Expense tracking is beneficial when you review your Expenses on a weekly or monthly basis or else it becomes worthless to track.

7. Cut down unnecessary spending

Slowly - slowly you will realise that sometimes you are spending more than enough on your wants. The reason is anything whether impulse buying or anything to get rid from this habit you must cut down all your unnecessary spending over time.

Ensure that you are cutting those expenses slowly if you cut them immediately or together after a time they will automatically come again in your notebook therefore, slowly but cut your unnecessary spending.

Best Methods to Track your Expenses

There are some methods to track expenses, sometimes you do not understand recording expenses in a notebook, so you can try other ways to track your expenses.

Notebook

A common and mainly acceptable way to track your expenses is recording expenses in your notebook. There are many reasons behind why people choose recording in a notebook. My personal reason is I found it satisfying to record in a notebook because it feels better to note physically.

Spreadsheet

Spreading is a digital notebook with rows and columns you can also start tracking expenses on spreadsheets like Microsoft Excel, Google Sheets, etc. also spread sheets come with more features and are easy to use therefore you can use them if you don't want to note them physically in the notebook.

Remember that when you are tracking your expenses in a spread sheet you are not disconnecting from recording your expenses.

Apps

You can also use apps to track your expenses and honestly apps are very easy to track expenses then notebook and spread sheet.

Money Manager, Wallet are the best app that provides expense tracking in addition they provide many money services like budgeting, saving, etc.

This is your choice which method you found easy and satisfying to track your expenses. It can be Notebook, Spread Sheet or Expenses Tracker apps.

5 Common Expense Tracking Mistakes

1. Not tracking small Expenditure

I said it 2-3 times that even ₹1 toffee you must note it many people ignore small expenditure.

2. Ignore tracking expenses

Many people start expense tracking by motivation as the result they forget or ignore tracking over a time period.

3. Do not record at the same time

Sometimes we spend money but think that we will record later and that later they don't come again. They forgot to record that entry.

4. Ignore Reviewing

Expense tracking is worthless until we are not reviewing that in a month or week.

5. Feel guilty after overspending

Sometimes we realise that we are overspending money when we see records. Although this is a good sign that you've realised, feeling guilty is a natural behaviour but it is meaningless if you don't work on improving it.

How Expense Tracking Helps in Budgeting and Money Saving

Expense Tracking is the base of budgeting and saving because

  1. It allow us to understand our spending pattern.
  2. Unnecessary spending is caught.
  3. Help in preparing realistic Budget with real numbers and real data.
  4. Identify Extra Money for saving.
  5. Also provide a feel of money control.

Conclusion

Today, we understand how you can track your expenses, how many types of expenses are, etc. But it depends on you how you track your expenses. Many people drop expense tracking in early days not because it is hard but because they don't build habit and discipline.

Therefore, keep growing, keep expenses tracking with moneyvault- your Personal Finance buddy.