How To Track Your Expenses

Money flows like water. It can gush like a raging river or drip like an annoying leaky faucet at midnight. If we use this precious resource mindlessly, we face drought. However, if we first observe the ebbs and flows, effective management becomes a simple matter of design. In other words, you NEED to know where your money goes in order to manage the flow. Once you know where your money flows, you can design a realistic budget plan and start making conscious spending choices for your hard-earned dollars.

Create an expense tracking system and establish a routine. January is the perfect month to start. I’ve tracked my expenses for over 15 years. It really doesn’t require a lot of time (~5 to 15 minutes a week). I pay my bookkeeper to do this task for me now and at about $1.25 to $3.75 a week, it’s worth it. If you have kids, this can be an educational task to delegate to them.

Expense tracking options include:

  • save all receipts and file them into large envelopes labeled by expense category
  • write each expenditure under a category column in a ledger book
  • write each expenditure in a pocket-sized spiral-bound notebook (carry it with you when you leave home)
  • use a software spreadsheet like Microsoft Excel or Open Office Calc
  • use a personal finance software program such as Microsoft Money Plus Premium or Quicken.
  • sign up for an online application such as Mint.

While all of the above methods work, I use personal finance software (specifically Microsoft Money Plus Premium because I like their Lifetime Planner tool). Both Microsoft Money and Quicken include a wide range of helpful tools to make personal money management tasks easy. Specific to this particular task of tracking expenses, Microsoft Money Plus Premium and Quicken personal finance software:

  • connect to thousands of banks and update your expense transactions automatically
  • automatically categorize your transactions and compare them to your budget
  • show you exactly where your money is flowing using charts, graphs and reports
  • let you see the big picture or drill down to the details

Four Tips:

  1. Make the most of on-line banking. To make tracking your expenses easy and accurate, pay for everything with a check, debit, or credit card. Check your account often and set up as many automated transactions as possible. (Important Note: If you pay routine expenses by credit card, pay off your account balance in full each month!)
  2. If you must use cash, keep your receipts and enter each transaction into your expense tracking system.
  3. Make it a habit to track your expense transactions regularly. Designate a time weekly for this task and at the end of each month, total the amounts spent by category. In my case, it only takes about 10-20 minutes per week to confirm my automatically downloaded expense transactions and to reconcile my downloaded bank account statements.
  4. Here is a comprehensive list of expense category suggestions. Modify my list to fit your own needs and lifestyle:

    Auto -repairs, gas, insurance, registration, tolls…
    Auto Payments
    Bank Account Fees
    Beauty -hair cuts, manicures, makeup…
    Child Care
    Debt/Loan Payments -create a different account/category for each loan
    Dining Out
    Finance Fees
    Home Improvements/Maintenance/Repairs
    Household Furnishings
    Insurance (Disability)
    Insurance (Health)
    Insurance (Homeowner/Renter)
    Insurance (Life)
    Insurance (Medical)
    Insurance (Personal Liability)
    Liquor/Tobacco -if applicable
    Mass Transportation -bus, train, light rail…
    Medical -everything except health insurance premiums
    Misc -avoid this category as much as possible!
    Mortgage Payments/Rent
    Savings (Education)
    Savings (Emergency Fund)
    Savings (Retirement)
    Savings (Specify Purpose)
    Storage Unit
    Subscriptions, Books, Software
    Taxes (Federal, State, Local)
    Tax Preparation Fees
    Toys (purchase, repair, insure) -includes boats, electronics, bikes, jewelry…
    Utilities (Electric)
    Utilities (Gas)
    Utilities (Internet)
    Utilities (Misc)
    Utilities (Telephone)
    Utilities (Trash)
    Utilities (TV Programing)
    Utilities (Water)

Questions for readers: Where does most of your money go? If you currently track your expenditures, what method do you use?

Published by

Millionaire Mommy Next Door

A self-made millionaire shares her recipe for success, happiness and financial freedom.

16 thoughts on “How To Track Your Expenses”

  1. Most of my money goes toward my mortgage and household utilities.

    I recently found to track my expenses and I absolutely adore it. It’s good for seeing where your money went (perception does not always reconcile with what is really going on) and there’s an OK budget feature. Love the charts.

  2. I successfully tracked every penny I spent last year & would recommend it to everyone. I don’t “budget” though. Budgeting implies restrictions & forces you to live within limits. I found that the simple act of tracking & consequently knowing how much cash I have available is enough to enable me to make the right choices.

    2 tips:

    1: Count money put into savings as spent money (this is alluded to in the list of categories but not explicitly mentioned).

    2: Don’t get confused by charts. A lot of tracking software produce lots of gorgeous 3D charts & graphs. I hope no one uses pie charts to make decisions:

    3: Don’t spend hours staring at your screen & stressing over the figures. It doesn’t help.

    I wrote my own software for tracking my spending in PHP & it’s hosted online so I can access it from anywhere. I spend probably 10 minutes a week inputting transactions as a date an amount & a load of tags like Flickr, a lot of my spending is automated & my system adds these transactions automatically so I don’t need to bother. You can then view lists of transactions by month or by tag, you can easily sum various transactions just by clicking on them & it is really easy to see what is going where.

    It’s on a free server with limited bandwidth so I don’t share it with the whole world, but if you have access to a php server + MySQL all the files needed are available on request.

  3. I love using It is not free but I am able to easily and quickly divided up my paycheck into our budget. The money sits in different envelopes waiting for bills. It automatically downloads all transactions from whatever checking and savings account I want. Then I move the downloaded info to whatever envelope is appropriate. I always know exactly how much money I have for ever budget item I have. It’s great to know how much money we’ve got put away for household stuff or groceries when headed to the store. Plus it keeps a record of each envelopes expensives for whatever time period I might need to check.

    Well worth the fee.

  4. I’ve been tracking my expenses for years now in Quickbooks. The majority of my expenses go towards rent and utilities. Literally 1/4 of my income goes to rent, about 1/8 of my income goes to utilities. I love QB’s graphs and pie charts, it’s been easy for me to figure out where I can save money. My next step is categorizing my savings, I’ve never done this before. Your list is helpful, I might need to enter these savings categories!

    P.S. I’ll have to check out Jon’s link on why pie charts fail, because I love them! They’re so colorful.

  5. I have an excel spreadsheet that I created myself. It’s awesome and works really well for me. It has all of the categories that make sense for me and calculates my average monthly spending and yearly totals. Love it!

  6. I appreciate the organization of expenses described above and have been using this system and refining it for my needs for years. My largest categories of expense are food (no mortgage to pay) and a couple of teenagers and education. I would suggest this additional category of education/personal de