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Tracking Your Spending (6 Practical Hacks To Get Started)

A big part of sticking to a budget is knowing how much you spend. Often, we don’t review our budgets until our spending gets out of hand. You’ll find yourself wondering, “How did I spend that much?” 

Well, it’s most likely because you weren’t paying attention to what you were spending! We all do it from time to time. The key is to getting a handle on it before it gets out of control. If you’re looking to start tracking your spending and expenses, keep reading!

We’ve gathered the best practices and methods to help ease you into expense tracking. Before we dive into the detail here are the key takeaways:

TL;DR

  1. Segment Your Spending Methods Into Categories
  2. Download an Expense Tracker App – such as Mint in the US or Lumio in the UK
  3. Separate Business Expenses and Personal Expenses
  4. Make a Budget, and Stick to It
  5. Use a Time Tracking App While Shopping
  6. Track Your Spending by Store

Why Tracking Your Spending is Important

Keeping track of your spending is the best way to stick to a budget. Funny enough, building a budget is one of the best ways to start tracking your spending, as well. The two are highly related, and depend on one another for personal finance success. Knowing what your bank account looks like from month to month is important, but tracking expenses is a good way to ensure that you don’t need to check your cash flow incessantly

When you track spending, you can also pick up on patterns. You can start to track your monthly expenses, and using those trends you can modify your budget in a way that benefits you. 

Overall, expense tracking is the first step in a long journey to financial freedom.

How to Start Tracking Your Spending

If you’re ready to start tracking your spending, check out these tips to simplify the process. All of these will help you get a better view of your finances, as well as your spending habits.

Segment Your Spending Methods Into Categories

Segmentation is a great way to start reviewing what you spend every month, as well as how you’re spending it. You should track purchases made with cash, a credit card, or a debit card. 

Knowing how you’re spending money is the first way to start tracking spending a little more closely.

If you’re prone to spending money on your credit cards, then reviewing statements is a good place to start

The same goes with debit cards and cash. Then, when you know how much you typically spend using each method, you can curb that spending. 

Spending more on credit cards than you do with cash or a debit card can be detrimental since the funds aren’t really there. Keeping track of your cash flow through every method of spending can help you understand where your money is being spent.

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Download an Expense Tracker App

There are plenty of UK expense tracker apps that are available that will make keeping track of your spending much easier.

Lumio was recently picked out in 2022 by the Metro and Technation as it allows you to track and control all your bills, savings, and investments in real-time. And it’s totally free.

You can get an instant snapshot of all your balances and bills, with the ability to track your day-to-day spending and look at how much you could save every month.

With Lumio, you can connect all of your accounts into the app, including your bank, savings, credit card, and investments. Their wide range of account connections really sets them apart, allowing you to manage your financials when you have things spread out across many different apps and platforms.

Lumio is registered with the ICO Data Protection Register as well as the Financial Conduct Authority Register, so you can sleep well knowing that your money is safe and secure and that your data is protected. They even have bank-grade encryption in the app for an added layer of security.

There are other expense trackers out there, and you can typically link your bank account or credit cards for automatic expense tracking. This is very helpful, as it means that you only have to pay close attention to your purchases in cash. These are easily entered manually, which can help you keep your spending in check.

When looking for expense tracker apps on the App Store or in Google Play, here are some tips:

  • Look at reviews in the App Store or in Google Play, this will give you an idea of the quality
  • Some expense tracker apps will be a premium application, look for some that come with a free trial
  • A good expense tracker app will double as a budgeting app, helping you plan for monthly expenses while tracking spending

Technology is our friend, and expense tracker apps are the easiest way to track your spending. The convenience of having expense tracker apps on your phone wherever you go makes expense tracing convenient.

Ultimately, we’re more likely to do something if it fits into our daily lives.

Separate Business Expenses and Personal Expenses

Many people run their own small businesses. If that sounds like you, then separating your business and personal expenses is a key factor when it comes to tracking your spending

Tracking business expenses should be done for two reasons; it’s a good way to keep track of business write-offs for tax purposes, and it’s an excellent way to separate your business and personal lives.

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In most cases, expense tracker apps won’t be suitable for tracking small business expenses. You’ll most likely need to look for a type of accounting software instead. Accounting software will allow you to keep your spending in check for your business, and it can be utilised to analyse your overall budgeting.

Make a Budget, and Stick to It

By tracking your spending first you can come up with a budget that is true to your spending, and it can show you where improvements can be made.

When tracking your budget, try to categorise specific purchases into the following categories:

  • Living Expenses: This should cover any costs that you have when it comes to your home. Rent, mortgage, insurance, home improvements, etc. These are all part of your living expenses.
  • Utilities: Utilities are a secondary cost related to living expenses. This should include your energy bills, your water costs, and your phone service.
  • Travel or Vehicle Expenses: Any expenses related to your car can be categorised on their own as well. This includes car payments, insurance, or the cost for gas. Travel expenses can also include airfare, bus fare, or any other form of transportation.
  • Food: Food and other items you can get at a grocery store can be categorised as a single area of spending.
  • Entertainment: Entertainment should include any recreational costs that you have. This includes streaming services, tickets to events, etc.
  • Savings or Investments: Any money that you put away on a monthly basis should be taken into account as well.

If you can’t find an area to place some of your spending into, create a “Miscellaneous” category. This should cover everything else. 

If you’re looking to understand you monthly budget more intimately, then splitting the costs into specific categories is the best way to do so.

Apps like Lumio do a fantastic job of helping you segment your outgoings systematically.

Use a Time Tracking App While Shopping

Alright, ready for a real challenge? This is one of the more extreme ways to track your spending, but, it’s proven to be highly effective. If you find that the more time you spend in a store, the more you spend, this is the route to go. Time tracking can help you keep your spending in check.

Allot yourself a specific amount of time to shop. Then, use a time tracking app to make sure that you stick to the time constraints that are set. Time tracking apps are a good way to prevent yourself from overspending.

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Track Your Spending by Store

If you have a problem spending too much in one place, creating a microbudget can help you curb your bad habits. Take a look at how much money you typically spend there, and then turn it into a realistic figure. Then, only go to that store with a specific amount of money. Once you’ve met your budget, it’s time to check out and leave! 

This is the best way to start weaning yourself off of issues associated with spending too much in one place.

What to Do Once You’ve Tracked Your Spending

After you’ve tracked your spending for a good amount of time, you can start moving towards fixing your spending habits. Understanding where your money is going can help you change your financial well-being.

Start Putting Money Towards Different Endeavours

It may surprise you how much money you spend on entertainment or food. If that’s the case, you can use your tracked spending to revise your budget and put money in different areas of your life. Reducing unnecessary spending through tracking can lead to saving or investing more money in the long run.

Cut Unnecessary Costs Entirely

When you’re tracking your spending, you may find that you have money leaving your account that you didn’t know you were spending. Tracking your spending can show you where hidden fees and costs are, and can help you eliminate them entirely. This can help you save more money overall!

Final Thoughts

Once you’ve started to track your spending, it becomes something interesting and fun to do! Tracking where your money goes is one of the best ways to keep you budget in check, and it’s easy to do. There are plenty of expense tracking apps for both personal finances and small business finances. No matter what you need help with when it comes to expense tracking, there’s a way to do it! Start tracking your spending today, and get on the road to financial freedom.

Tom
About author

Fully qualified CISI Investment adviser for 5 year. Managed UK private client portfolios.
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