In my post on how to make a money-saving budget (with a free budget-making template) I talk about how keeping track of monthly expenses is just as important as making a budget. In fact, without actually tracking your expenses, there’s just no point to having a budget!
But together, budget-making and expense tracking are powerful money-saving tools.
Fortunately, it’s pretty easy to keep track of monthly expenses. Plus, you’ll be rewarded with saving money every month. In this post I’ll show you exactly how to track your spending plus offer a few tips to make it easier to do. Let’s get started!
When beginning any new habit, it’s important to know the why as well as the how. Maybe even more important. Knowing the purpose behind an action will provide that extra motivation to keep up with a new habit.
I find what Ruth Soukup, blogging expert at Elite Blog Academy, says about the process of creating a new habit to be true: “For most of us, learning a new skill follows the same pattern. We go from optimistic to frustrated and overwhelmed. Then we get stubborn and determined, and after a while, we break through and it becomes second nature.” Although Ruth is talking about writing as a discipline in the context of blogging, I really think what she says applies to forming any new habit.
So what’s the why behind tracking monthly expenses that will help you stick with it when going gets tough? Let me tell you a little story:
In our family I’m typically the one keeping track of monthly expenses and updating our basic budget. I enjoy working with numbers and these detail-oriented tasks come naturally to me, so I don’t mind. However, after having our second child life got a little more complex and I had trouble figuring out how to manage all the same tasks I was doing before. Since we had been budget-keeping and expense tracking for some time, we thought we had a pretty good handle on it and didn’t need to be quite so obsessive about recording every single expense.
Some months went by, life started getting a little easier, and I thought I would resume recording our monthly expenses just to be sure we were staying on track. After wading through the pile of receipts from the month (it’s crazy how many receipts our family can generate in one month. Crazy!) we discovered we had spent $400 more in food expenses (groceries and eating) than usual. WHAT?!?!?! We had spent about double in groceries that what we normally did. Naturally, I panicked for a few minutes and wondered in shock how that could have happened.
As I mentioned in my budget-making post, money has a way of spending itself when you’re not looking. We had gradually drifted toward eating out and ordering take-out more frequently, and because we weren’t recording our expenses we didn’t notice just how much we were going over-budget until it was too late.
We couldn’t unspend that money but we could resolve to pick ourselves up, brush ourselves off, and get back to regular monthly expense tracking.
And that’s how we learned our lesson in just how important it is to record monthly expenses!
It’s so easy for spending habits to change slowly over time and to begin spending more and more without quite realizing it. Having a budget will only help you reach your financial goals if you actually stick to it. Keeping track of monthly expenses is the only way to ensure you are staying within the limits of each budget category.
Quick Review: Reasons to Track Monthly Expenses (Even If Money Is No Issue For Your Family)
- It will help you achieve your financial goals.
- You will be able to save more money every month than if you don’t track your expenses.
- You will have peace of mind because you know exactly where you are at financially.
- You will be able to catch small changes in spending habits before it becomes a problem.
- It will help you create positive spending habits.
Have A System
Having a good system in place for keeping all your receipts is at least half the job of tracking your monthly expenses. Once you’re in the habit of saving all your receipts, the rest is easy! We follow two rules in our family when it comes to receipts:
- Always ask for a receipt (even for things under $1)
- Always put the receipt in the designated receipt-holding place
The first rule is super important because even expenses under $1 can add up to a lot over the course of a month. For example, let’s say you purchase an $.75 Diet Coke at the gas station on your way to work (cough husband cough) 20 times in the month – that adds up to $15/month and $180 over the course of a year. If you don’t save and record all your receipts, even for small amounts, it will be difficult to keep accurate track of your spending and it will seem like money just disappears.
For the second rule, our designated receipt-holding place is a strong magnetic clip on the refrigerator (see right). You can get one like it here. It’s not the prettiest thing but it does the job. When I come home from shopping or receive any invoices in the mail I always clip receipts here to the fridge. The most difficult thing about it was making a new habit of it when we first started using this system. However, now that my husband and I are both in the habit of asking for receipts and putting them here on the fridge it makes tracking monthly expenses so much easier!
Find a receipt-keeping system that works for you and your family. Perhaps it’s a folder that you keep at your desk, or a pouch inside a 3-ring binder that you use for organizing your family records.
I love the convenience of the refrigerator magnet because there’s less chance the receipt will get lost between my wallet and where we keep our records upstairs. However, I’ve considered something a little prettier such as this rustic metal file holder and these super strong magnetic hooks (I just haven’t gotten around to ordering them yet!). I would probably use a pretty folder as well just to keep everything looking neat and tidy:
What if it’s not possible to get a receipt for a cash purchase? Good question. In cases where I can’t get a receipt, such as the farmer’s market or the parking meter, I use the FREE Evernote app to make a quick note about the amount of purchase and what it was for. You could also send yourself a text message. With 3 littles at home I’ve found that I just don’t remember things as well as I used to! This way I still have a record of the purchase and just need to remember to check my text messages when it’s time to actually calculate our total expenses for the month.
For online purchases, typically you will get an email invoice of the purchase. A great way to keep track of these is to have a labeled folder in your email such as “invoices” or “receipts” and move those emails over right away. Then when it’s time to tally up all your expenses for the month you just need to open that folder. Easy peasy!
If you have Gmail, check out the free app IFTTT (If This Then That). It’s a nifty little app that you can set to do all kinds of different functions. One thing it can do is send all your email receipts, invoices, and orders to a Google Spreadsheet.
As long as you’ve made a budget for your family, you only need to record expenses that change from month to month. Typically that means things like groceries, gas for your car, household supplies such as paper towels, napkins, etc., and personal spending. You won’t need to record expenses that are the same every month such as a Netflix subscription, your rent/mortgage, and your car insurance, for example. If you haven’t made a budget yet, head over to my post How To Make A Budget That Will Save You Money and do that step first.
Free Pretty Template For Tracking Monthly Expenses
When it comes time to sit down and record our monthly expenses, we use Microsoft Word. I find it the easiest and least intimidating option since I’m pretty familiar with Word. Here is a pretty template to get you started if you choose to use Word for your expense tracking: Monthly Expense Tracking Template. Just download and edit as necessary. You should be able to edit the month and reuse the template each month as well as change the categories to fit your own budget category names However, if Word isn’t your thing, no worries! There are lots of other program options to choose from.
Best Programs And Apps for Tracking Monthly Expenses
- Microsoft Excel: If you have this program on your computer and know how to use it, it can be a great for keeping track of expenses. It’ll do the math for you which is a huge plus!
- Expense – Spending Tracking: This free app is only available for iOS and I have an android so I haven’t tried it myself, but it looks like a very useful app. Basically, you choose your budget category within the app and enter the amount. If I had an iPhone I would definitely give this app a try.
- Wally: This free app is available for iOS and Android devices. With this app you can take pictures of your receipts to keep a digital copy, input your expenses, and see exactly how your spending compares to your budget as you go through the month.
- Mint: Set your budget and keep track of expenses all-in-one with this free app for iOS and Android.
- YNAB (You Need A Budget): Similar to Mint, you can set your budget and track your expenses. This app works with iOS and Android, but does cost $6.99/month. However, they do offer a full refund if you are not satisfied at any point, and their website claims the average user saves $600 by the second month and $6000 in the first year. The app seems to have some great goal-setting and accountability features.
- Home Budget with Sync: Available for iOS and Android this app ($5.99 one-time purchase) can sync with multiple users in the household and keep track of your expenses against your set budget.
Our Monthly Method
Okay, so here is what it looks like for us to keep track of our expenses each month:
About halfway through the month, I sit down at my computer and go through the receipts/invoices we have collected so far. Then I record each purchase by writing down a brief description and the amount in the budget category it belongs in.
I do the same at the end of month with the receipts/invoices we collected the second half of the month.
It’s very important to not wait until the end of the month to record your expenses. First of all, doing it this way breaks up the task so that it’s not so overwhelming. It always amazes me how many receipts we collect just from normal, recurring purchases such as groceries and household items.
Second of all, and even more important, is that by going through your purchases halfway into the month you get a good picture of where your spending is at and how much you have left in your budget categories.
It’s not uncommon that we find that we have less than half of our grocery budget for the second half of the month. Usually this just means no more trips to Costco for bulk items and eating simpler meals for the rest of the month. However, if we didn’t look at where we were at halfway through the month, we’d probably overspend on groceries.It's easy to overspend, but it's also easy to slow down your spending when you know exactly where you're at budget-wise.Click To Tweet
Super Helpful Tip To Make Recording Easier
Typically the task of recording our monthly expenses takes me about half an hour to 45 minutes twice a month. That’s a small investment of time that pays us back in peace of mind and the ability to save money (or at least not overspend!).
However, there is one thing I do that makes the process of recording expenses super easy: rounding amounts to the nearest dollar.
You might think that doesn’t sound super accurate, but I did a little test to see what the difference was between rounding and exact amounts. Here is what I found using 39 receipts and added them up, once by rounding and once by exact amounts:
- Exact: $150.93
- Rounding: $150
That’s not too bad! I’m willing to live with a $0.93 difference to avoid doing exact calculations. Of course, if you use a program like Excel, it will do the math for you, but you could still save time by entering in rounded amounts.
Plus, the IRS allows people to round to the nearest dollar when doing taxes, so I say this method is legit!
What To Do If You Over-Spent On A Category
Expenses can add up so quickly and sometimes it’s hard to avoid going over-budget. When this happens, never fear! There are ways of dealing with what I call an overage:
- Consider how much flexibility you have. There is a big difference between overspending by $40 when you’re putting $1000 into savings every month versus $100 a month. If you have quite a bit to extra to spare you might consider just writing that overage off for the month and trying again the next month to stick more closely to your budget.
- You can amortize the overage. Basically this means that you take the expense/overage and break it up over several months to pay it back gradually. For example, one particular month we overspent our home/family expenses category because we found a great deal on diapers and wipes at Target and bought more at one time than we usually do. I think we overspent by $70 or so. Instead of trying to recover that entire expense right away, we spread it out over the next 3 months – that’s about $23/month for 3 months.
- Learn: how and why did you go over your budget? What can you do differently next month to stay on budget? For example, perhaps you can stay on budget better by taking your lunches to work more frequently and reducing the number of times you eat out to once per week.
- Go earn some short term cash. Sometimes you just need a little extra cash. Here are two super-easy ways to make quick cash that require no investment or commitment:
- Sell some items from your home that you don’t need or use anymore. You might be surprised how much money you have just sitting around your house!
- Give plasma. Typically you are ‘paid’ with a debit-type gift card (can you tell this is something we do?)
- Take drastic action if necessary. Sometimes you have to take drastic actions to keep your budget on track, such as getting rid of your cable for a while or not going out to eat at all. Think of these things as short-term sacrifices that will pay off in the long run. Staying on-budget is worth it because either way you’re creating momentum – either toward financial stability or toward debt. The more you’re able to stick to your budget the easier it becomes.
- Reevaluate. If you find that you are consistently going over budget, look over your budget categories and adjust accordingly. Perhaps you just need to add a little more wiggle room into a category or two and live with a little decrease to your monthly savings.
What To Do If You Have Leftover Money (Under-Spent) On A Category
Well, it’s always a nice surprise when we have a bit of room leftover in a category at the end of the month! Sometimes that amount helps cover another category that we overspent in. For example, one month we might have $25 left in our grocery budget but we overspent by $30 in our home expenses because we really needed humidifier filters and couldn’t wait until the next month. Then we’d just be left with $5 to carry over into the next month.
If you truly have leftover money that isn’t needed in any category, you have a few options:
- Add it into a category for the next month where you think it might be needed
- Start an “extra savings” category for something special in the future such as a vacation or a special purchase
- Consider using an investment app such as:
- Acorns: If you typically have a little bit of wiggle room in your budget, consider using this app available for iOS and Android. What it does is every time you make a purchase with your credit card, this app rounds up to the next dollar and automatically invests that little bit of change. You would need to adjust your expense tracking records to account for this, but it could be a neat way to build up a little investment portfolio. This app costs $1/month.
- Stash: Also available for iOS and Android, this $1/month app allows you to start investing with just $5. The app aims to educate about investing and trades and withdrawals are free.
Now It’s Your Turn!
I hope these tips and ideas motivate you to start tracking your monthly expenses. Our family has really benefited from making expense tracking a habit – it’s the only way our budget works. Not only will you save money by preventing overspending, you will also be able to see your spending patterns and modify them to save even more money each month.
Ready to take the next step and start cutting your monthly expenses? See my post on 33 ways to save money every month…
Do you have a special method of tracking your family’s expenses? I’d love to hear from you about what has worked well for your family. Thanks as always for reading!