Have you ever tried creating a budget and following it throughout the whole month? If you did, then you probably know that it can be quite challenging not to go over it – after all, all it takes is one night eating out too much or ordering a taxi, and before you know it, you find yourself going way over what you were planning. Instead, you could have just eaten dinner at home or used some of the more affordable means of transport such as Uber or Lyft (if you want to find out more about why they are cheaper than taxis, you can check out this article).

However, should this really come as a surprise? For many people, budgeting is just too boring or too complicated. They prefer not to plan ahead and just go with the flow – if they will have enough, then great. However, what if we told you there is a way of making budgeting, as well as tracking your monthly expenses more clear and useful to you?

Because that’s exactly what we will be focusing on in this article. So, if you want to find out more, all you have to do is keep reading.

Understand the Purpose Behind Tracking Your Expenses

Before you start doing anything else, you need to understand why you want to keep track of your expenses, and why is it important in general.

There are many people who spent hours planning their budget and creating beautiful spreadsheets that are supposed to make budgeting not only easier but also pleasing to the eye – only to realize two weeks later that it isn’t working at all, and wondering why that’s the case.

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The truth is that they probably started organizing their budget without the right preparation – remember, the budget needs to be built on real numbers, on how much you are actually spending during a month. While it might be relatively easy to estimate how much you spend on monthly bills accurately, discretionary expenses are a completely different story. That’s exactly why tracking your expenditure is crucial – it gives you a real picture of what you are actually spending your money on.

Know the Difference Between Tracking and Record Keeping

Some people mistake tracking what you spend your money on and keeping a record of your expenses as the thing. The truth is, while they are similar, their purposes are different. To put it simply, record keeping helps you in being able to pay your bills on time and stay on top of what you own. When record keeping, you collect all the receipts and make sure that what you paid matched the amount you were supposed to be charged.

Tracking, on the other hand, is more about understanding what the money you spent bought you. By looking at the items on the receipt and not only at the amount, you can notice your spending habits and understand what you can do to change them.

Tracking Your Expenditure – Step by Step

Now that you know why it’s important to track your spending, as well as the difference between tracking and record keeping, we can move on to the last point – how exactly can you do it?

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The first thing you should remember is that in order to get realistic results, you shouldn’t change your spending habits straight away just because you know that you are tracking them. The point of doing this is to understand what it is that you spend the most money on, and how to change them eventually.

There are a few ways in which you can keep track of your spendings – which one you choose is solely your personal preference. You can, for example:

  • Use a phone app – this is a great way of tracking your spendings at the time you spend. What’s more, there are some apps available that, apart from tracking, also allow you to set a tracking limit or a reminder.
  • Collect your statements and receipts – every time you pay with a credit or debit card, the bank records your transaction. You can use the statements from your card and compare them with the receipts you have collected.
  • Write the data down – write down every purchase you make on a piece of paper. Include information such as how much money you spent, what is it that you bought, and the data. Do it either right after purchasing or once a day, but don’t wait too long to do it -especially since it is easy to forget these kinds of things.
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Of course, these are just a few ways in which you can do it – whichever you choose, make sure that it’s what you are comfortable with. After all, if you don’t really like using a phone, what’s the point of tracking your expenses with an app, right?

At the end of the tracking period – which can be however long you want it to – look at all the records and draw some conclusions. What is it that you spend your money on? Did you need it, or did you buy it because you simply liked it? Is there any other place where you could have purchased the same thing cheaper? Answering those questions will help you think twice about buying something in the next tracking period.

The Bottom Line

Budgeting doesn’t have to be hard or boring – however, you need to know what to do. While, of course, you could just set an amount you want to spend in a particular month and call it a day, you might find yourself going over it sooner than expected. Before you start planning your budget, you need to understand what is it that your money is being spent on.

Having a budget will help you be more in control of your money. Who knows, maybe you will even be able to put aside enough money to spend a few weeks of the next summer vacation in your dream location?

This post is written by Oliwia Zawadzka.