You know you should create a budget for your expenditures but you don’t know where to start and you don’t want to be hemmed in by your own budget. What should you do? Start the process by tracking your expenditures. After all, before you can do a budget, you need to know what you are spending your money on. Once you know your present (track your expenditures), you can plan for your future (create your budget).

How?

There are several ways you can track your expenditures. All of them require diligence on your part.

• Excel Spreadsheet: This works best if, as most people do, you pay for stuff by several means – cash, checks, credit/debit card. Pay for something (Starbucks, groceries, restaurant, whatever), take a receipt and put it in your pocket, then input it into your spreadsheet every evening. You must be diligent and input every little expense including the $3 coffee because they all add up. If you skip an expense, you are cheating yourself. You can create your own spreadsheet or download a template by Googling “expense tracker template”. The advantage of creating your own spreadsheet is that you can categorize your expenses the way you want and that befits your lifestyle. Make it yours. Don’t use Excel? Instead, use the free Google Sheets. If you are literate with spreadsheets, you can create graphs and charts that may help you understand what you are spending money on.
• Quicken/Quickbooks: This is similar to an Excel spreadsheet but with the categories already sorted and in a canned format. If you already use Quicken/Quickbooks, it is likely linked to your checking and/or credit card accounts, which means that you will still need to manually input all of your cash expenses, which means you still need to take receipts for what you pay cash for.
• Use Only One Account: Are you a Millennial and you don’t use cash? Are you disciplined enough not to use your credit card and instead only use your debit card? Then you might get away with using your monthly account statement as a de facto expense tracker. However, it is really difficult to run all of your expenses through just one account. Think about accounts that you might have set up to auto-pay through your credit card, for instance.

Added Advantage of Tracking

Just by tracking your expenses you will take the first step toward limiting what you spend. If someone is watching what you are spending, i.e., yourself, you might think twice before deciding to buy something, or you might have buyer’s remorse and decide you don’t need to spend for that item again. Do I really need to buy coffee every day, or can I save money and make it at home instead? Can I limit my restaurant expenses by getting food to-go from the grocery store deli (although that can be costly as well)? All of these things add up and just the notion that you are tracking yourself might spur you to keep a lid on what you spend.

IMO

It’s not earth-shattering advice to propose that you track your expenses, but it is an important first step and it requires that you have discipline to do it. You may not want to take the next step and create a budget for yourself but if you keep tracking yourself at least you know what you are spending money on, and that is a good part of the battle to live within your means,.