Want to save more money each month? Tracking your spending is a good start.
Are you looking for ways to stop living paycheck to paycheck so you can build emergency savings, contribute more to a retirement account or save for a big purchase? Maybe you have too much debt and want to start paying balances off and avoid going down the rocky debt path again.
Whatever your circumstances, tracking spending habits can get you where you want to be financially. If you want to meet financial goals, you must first know where all your money goes each month. That way, you can eliminate spending habits that fritter away money that could otherwise go towards making your life more financially secure.
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1. Create a budget
A major step towards tracking your spending habits is creating a monthly budget so you know which expenses are necessary and which can be tweaked, or maybe even eliminated. There’s no need to be intimidated by what may seem like a tedious task, either. That’s because there are plenty of resources out there to help you budget.
You can use free budget templates found online and peruse personal finance sites for advice and instructions. Or, meet with a credit counselor at a nonprofit credit counseling agency for assistance putting together your first monthly budget. If you prefer to budget online or on your phone, you can also download one of many free budgeting apps available to get started.
Find out: How to Create a Budget and Stick to It
2. Use a budgeting app
Many budgeting apps link to your banking account, credit or debit card so you can easily track spending. For example, the Mint app tracks spending by category – utilities, bill payments and auto expenses, for instance – so you can pinpoint monthly and annual spending patterns and adjust accordingly.
For the best results, look for a budgeting app that comes with more than just a budget and spending tracking. Some budgeting apps also show your credit score and even offer tips on how to meet your financial goals.
3. Pay most expenses with a credit card
When you pay for bills, groceries, gas and all your other purchases with one credit card, you know exactly where all your money is going. Tracking spending patterns can’t get much easier than that. Be careful with this method, though.
The last thing you need is to create more trouble because your credit card spending got out of control. To avoid credit card debt and interest charges, pay off the entire statement balance each month.
4. Read account statements
If you’re still getting credit card or bank statements in the mail, don’t just toss them in the trash after a quick glance at the payment due date. And if you signed up for paperless statements, don’t simply ignore them next time you pay online. Take time to let the brutal truth of what you spend most of your money on sink in.
You may be shocked to learn that you spend $150 a month on coffee shop pastries when you could buy baked goods at the grocery store every week for a lot less. Maybe stopping by the convenience store daily for a snack tacks on another $100 to monthly spending. You may be paying $50 a month for streaming services you rarely enjoy.
Once you know what you’re spending money on each month, you can cut or adjust spending habits to free up money for savings and other financial goals.
5. Use a cash envelope system
There’s nothing like watching money actually leave your hand to illuminate spending habits. You can’t pay cash for everything, but you can probably allocate at least a few hundred dollars each month to envelopes for certain budget categories such as groceries, dining out, clothing, toiletries and entertainment.
The cash envelope system, which works in conjunction with your monthly budget, makes you think about spending every dollar so you don’t waste money on unnecessary expenses.
Find out: How to Make a Cash Envelope System
6. Review your credit card year-end summary
When your credit card issuer sends the year-end summary for your card, sit down and take a close look at all the spending categories. Generally, spending on your card is broken down on the summary by categories, including things like shopping, bills and utilities, groceries, entertainment, food and drink and other expenses.
The summary typically lists the total dollar amount, the dollar amount spent on each category and the percentage of the total for each category. Once you have this information, find areas where you can cut back such as shopping and dining out for example. Then adjust your monthly budget to allow you to put that extra money in a savings or retirement account.
Published by Debt.com, LLC