One of the quickest and easiest ways to get a clear picture of your finances is to track your spending. When you know where every penny is going, you can make informed decisions about your money and how to manage it. In fact, I don’t think you can truly get your finances in order without tracking your spending, at least for a few months.
I tracked my spending religiously for many years, to the point where it became second nature. But after awhile, my budget became routine, and I got in a groove. I stopped tracking my spending because I rarely went over budget.
But I’m getting back on the tracking bandwagon, and it’s because of my damn house.
In the past two months since I’ve bought a house, my spending has been very irregular.
I knew I would need to spend money to get our house up and running, but I had no idea how much. The answer is a lot. Since we purchased the house, I feel like I’ve been hemorrhaging money, a feeling compounded by the fact that I’m not tracking my spending, so I don’t know how much I’m spending. I need clarity, I need to know where my money is going, I need to track my spending.
There are a ton of ways to track your spending, and I’ve done them all. Here are the top three:
Pen & Paper
The good old fashioned pen and paper is a cheap and fail-safe way to track your spending. Many will argue that the act of physically writing down your daily spending gives you time to pause and consider each transaction.
It’s a very mindful way to go about your spending tracking. I’ve done the pen and paper thing before, and while it’s not for me, many swear by it.
A slightly higher-tech but still manual method for tracking your spending is to use a spreadsheet. I spent about a year tracking my spending using a spreadsheet, and found it slightly easier than the pen and paper method but still cumbersome enough that I paused and thought about each purchase.
Using a spreadsheet has several major pros. First, it’s highly customize-able. I was able to set up categories that accurately matched my budget categories, which meant I could correctly track whether I was going over budget or not. Second, since I do most of my spending on my credit card, it was relatively easy just to copy and paste my credit card transactions from one window on my computer to my spreadsheet in another.
On the other hand, the spreadsheet method had some cons. Unlike software programs like Mint.com, it didn’t automatically import my transactions. I had to do it by hand, and it took a little bit of work to update that spreadsheet.
Sometimes that was just enough work for me to avoid doing it. This little bit of extra effort was often enough for me to avoid tracking my spending. I would often start off the month following it, and then fall off the bandwagon.
Partially tracked spending is pretty much useless, so I won’t be using this expenditure tracking method moving forward.
The only expense tracking method that I used religiously for years, without fail, was software.
Mint.com is a free website that you can use to track your spending, debt, and net worth automatically. You just input your banking information and Mint.com automatically loads and categorizes your saving, debt, and spending.
It’s useful not just for spending tracking but also to track your debt repayment and net worth. It has excellent graphing abilities and can hold years of transaction history, making it easy to compare spending categories year over year.
The thing I love the most about automated software is that it’s automatic. Mint.com imports my transactions automatically, every day. All I need to do is set my spending limits and make sure the transactions were categorized correctly, which takes about 30 seconds every day.
Regarding the amount of effort required to track your spending, using automated software is certainly the lowest effort, lowest barrier way to go. In my world, low-effort, low-barrier is important.
There are some drawbacks to using software to track your spending. The biggest one is security. Most websites and software programs that import your transactions automatically require you to input your banking information, including your pin or password. This is a violation of most cardholder service agreements since you are not supposed to share this information with anyone.
That said, according to the Financial Consumer Agency of Canada, there are no known reports of fraud or suspicious activity due to “third-party aggregators” (i.e., financial software), in Canada. In fact, Mint.com uses the same level of security that Turbotax uses to Netfile your income tax return, so the security risk seems relatively low.
Why I’m Tracking My Spending Again
I’ve been tracking my spending since the beginning of October, and it has brought me such a sense of clarity to my finances that I’d been missing. I’ve been using Mint.com and it’s been great. Instead of feeling anxiety every time I need to spend money buying this or that for the house, I can relax knowing that I am still well within my budget for the month.
Photo Credit: Angelina Litvin
Why do you track your finances? Which method do you use? Should I upload my manual tracking spreadsheet for you to download? Let me know!