Woman holding iPhone tracking spending using the EveryDollar budgeting app

How to Track Your Expenses

If you want to win with money, you have to change your actions with money. The way you do that is to make a budget and then stick to it. The way you do that is to track your expenses. Maybe this is new terminology for you—but don’t be intimidated. We can give you the information you need to move forward in your money journey (with confidence!) while moving away from whatever’s been holding you back.

Steps to Track Your Expenses

Step 1: Create a Budget

You won’t be able to track expenses without one. What’s a budget? It’s your monthly money plan—your expected income and expenses put in categories for the whole month.

A budget doesn’t control you; you control it. It’s a guide you set up to make sure your money is doing what you’re telling it to do.

There are three basic steps to setting up a budget:

  • Write down your monthly income.
  • Write out your monthly expenses.
    • Start with food, shelter (your mortgage or rent plus utilities), clothing, and transportation.
    • Once those are covered, list out all other expenses like entertainment, eating out, pan flute lessons, television streaming services, gym memberships, giving, saving, etc.
    • If you’re new to budgeting and not sure where to start, check out our recommended budget percentages.
  • Make sure your income minus your expenses equals zero.
    • If the math doesn’t work out, you need to adjust your categories until you get that zero-based budget.

We could talk about tips for setting up budgets all day long, but that’s a quick summary.

Step 2: Record Your Expenses

Every day. We mean it. Every. Day. If you don’t keep up with what you’re spending, you’ll be living in a fantasy land where wallets never go empty and bank accounts stay busting and full. That’d be great—but it isn’t the real world. In the real world, you have to keep up with what you spend.

This action is key in communicating to your spouse and yourself what money is left to use in all those categories you set up through step one. And that brings us to the next step.

Step 3: Watch Those Amounts

Tracking your expenses can help make sure you don’t overspend in any area. When you enter an expense, make sure you keep track of how much is left in that category.

If you’re married, make sure both of you are recording all spending and checking in with each other before you spend. This is great for accountability and communication. That way neither one of you will ever say, “I didn’t know you spent most of the entertainment budget buying tickets to the wax museum. I wanted to sign us up for a couples beatbox class.”

Budgets are blown when you don’t track and watch your expenses.


Why Should You Track Your Expenses?

We just touched on this, but now we’re going deeper. Because, let’s be honest, if all you’re doing at the start of each month is writing down or typing up budget lines and allotting totals to each item, you aren’t holding yourself accountable to keep within those lines. 

Many of us began “budgeting” this way. And it’s a start. It’s good to have an impression of what money should go where. But if you aren’t tracking your expenses, you don’t know where your money is really going. You’ll run the risk of continually setting unrealistic budgets, and you’ll never meet your marvelous money goals.

And that isn’t what we want for you. Remember—we want you to succeed! So let’s look at different methods to make that happen.

Four Ways to Track Your Expenses

1. Pencil and Paper

Don’t dismiss old school methods. Plenty of people have and still do stick to a paper budget. The biggest benefit here (besides not needing access to technology) is that physically writing things down requires an active brain. Active brains are really quite helpful when you’re dealing with money.

The inferior side to this method is pretty clear: Most of us don’t keep up with paper copies of stuff these days. When you get a receipt, you have to hold on to it until you can get it to your budget and write it down. Sometimes receipts are misplaced. Sometimes the cash you spent on a quick trip to the dollar store is forgotten. Sometimes a few debit card purchases aren’t written down quickly by one spouse or the other. Any of these communication breakdowns can lead to a busted budget.

2. Envelope System

This expense tracking method is set up a “pay cash in person” method. You can auto draft things like retirement, mortgage and some utilities. You might send checks or make a debit card payment online for other bills. But the expenses you pay for in person become cash only.

At the start of the month, you put cash in envelopes labeled with budget lines. Groceries, entertainment and eating out are three great examples. Take your “groceries” envelope with you when you head to the grocery store. When the envelope is empty, your spending stops. Your money is essentially tracking itself.

Let’s face it, though, paying in cash can sometimes be inconvenient. Who wants to go inside the gas station to prepay at the register? Who likes counting out or keeping up with coins? Plus, with the rise of e-commerce, paying cash isn’t always an option. Still, this is a powerful way to track expenses, because physically watching the money leave the envelope inspires a whole new level of responsibility.

3. Computer Spreadsheets

It’s time to talk digital. Plenty of people are spreadsheet fanatics, and they’ll talk to you about its perks until the end of time. The plethora of templates, the ability to customize your budget, the beauty of having the math done for you on the screen—these are a few benefits to spreadsheet budgets.

But those spreadsheet enthusiasts aren’t always married to fellow spreadsheet enthusiasts. Couples should be in open communication about their spending; don’t let spreadsheets come between your happily ever after.

The second disadvantage to spreadsheets is getting to your computer to keep up with your spending. If you grow lax on these daily visits to enter expenses, your budget isn’t really a budget—it’s just a spreadsheet full of good intentions. Good intentions are where you start, but good intentions don’t accomplish money goals on their own.

You probably spend a fair amount of time on your computer, so maybe you think spreadsheets will work for you. But you know what’s always by your side? Your phone. Which brings us to the next—and, we boldly declare, BEST—option for tracking your expenses. Drum roll, please.

4. Budgeting Apps

Specifically, EveryDollar. We’re not going to beat around the bush here. With our free budget app, you can create a budget in minutes and literally change your financial life. You can log in on your phone and track the expenses mere moments after they occur. Don’t leave the parking lot of the dollar store without recording that you spent $3 and tax on a birthday balloon, gift bag and stuffed clownfish you hope your toddler niece will think is Nemo.

As you can see, the convenience of a budgeting app is its greatest asset. Of course, EveryDollar boasts even more. Customize your templates to make them fit your spending and saving needs. Set up funds to meet big money goals. And sync your budget with your spouse’s devices, so you guys are in constant commerce communication.

The two things to keep in mind with a budgeting app both stem from one key word: consistency. If you know you’ll forget to add in your spending, we can help. Try EveryDollar Plus, which links to your bank account and streams your transactions for you. All you do is drag and drop your expenses to the correct categories.

The key thing to remember is this: You can’t set up your budget and leave it, even with EveryDollar Plus. The app doesn’t shut down your bank account when you’re about to buy a 17-layer burrito that’ll push your restaurant budget over the edge. After all, a budget is a plan for your money, and what good is a plan you don’t follow?

No matter the method, you have to make tracking your expenses a habit to win with money. If you aren’t watching where your money is going, you’ll always be wondering where it went. But when you set yourself up with the right tools and know the work is worth it (which we totally verify from personal experience), you’ll move beyond good intentions into financial victories.

Ready to start? Sign up a free EveryDollar account today!