Budgeting is one of the building blocks to building wealth. As a former athlete right out of school, I didn’t know the best place to start when it came to budgeting. Speficially, I wanted a good process to help track my expenses. What should my first steps be? How should I organize my process? Should I prioritize my income, debt, savings, or another category? I had some questions.
When you’re new to budgeting, there are few easy steps you can take to help track your expenses, starting with the items below.
Steps to Include When Tracking Spending
Create a schedule. I typically review my budget once a month. When I started my journey of cleaning up my finances, I would check in on my spending habits every week. Whether it’s daily, weekly or every few weeks, put time aside so that you can review your expenses, learn more about your spending habits and create goals to improve your situation.
Check your account statements. Instead of starting from scratch, you can check out past spending habits by reviewing your account statements. I recommend downloanding or printing about 3-5 months worth of records. Reviewing your spending history from checking account statements and credit card statements can help you look at two different expenses:
- Fixed expenses: these expenses are the same every month and might include rent, mortgage, utilities, insurance, debt payments, etc.
- Variable expenses: these items change each month, which typically include food, clothing, travel and other expenses.
Doing this will help set you up for your next step: creating categories.
Categorize all expenses. Next, take time to categorize your expenses into similar buckets. After reviewing your statements, segment expenses into categories like food/dining, housing, entertainment, subscriptions and others.
When I first categorized my expenses, I noticed I spent waaaay too much money on ordering takeout and eating out. By changing my eating habits I was able to save more money each month.
Track and evaluate. Now that you’ve collected and sorted your information, determine how you’ll track your expenses. The right method is the method that works for you: apps, spreadsheets, notebooks, etc.
Finally, evaluate where your areas of weakness are and how you can improve your money situation. Are there areas where you can spend smarter, for example buying groceries and eating out less? Can you be more strategic where you allocate your money, such as spending less on entertainment and using that moeny to pay down debt?
Repeating these steps every few days/weeks/months will help you develop great habits in tracking your spending and boosting your budget.