7 Ways to Track Monthly Expenses
When you start tracking your expenses each month, you can separate your spending into three categories: needs, wants and savings.
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Tracking your expenses on a regular basis can give you an accurate picture of where your money is going — and where you’d like it to go instead.
Then, by using a budget, you can accurately account for all the bills you need to pay going forward. But before you start plugging numbers into a spreadsheet or app, take a minute to list out each of your expenses.
Here’s how to get started tracking your expenses.
1. Check your account statements
Pinpoint your money habits by taking inventory of all of your accounts, including your checking account and all credit cards you have. Looking at your accounts will help you identify your spending patterns.
Your spending will consist of both fixed expenses and variable expenses. Fixed expenses are less likely to change from month to month. They include mortgage or rent, utilities, insurance and debt payments. You'll have more room to adjust variable expenses like food, clothing and travel.
2. Categorize your expenses
Begin by grouping your expenses into different categories. Categorizing your expenses will help you not only track how much you’re spending, but also see where your money is going.
Some personal finance websites and credit cards automatically tag your purchases in categories like “department store” or “automotive” to help you identify themes. You might find that those impulse buys at Target are costing you a lot. Or maybe you’ll realize you’re paying for recurring subscription services, such as Spotify or Babbel.
Another way to categorize your expenses is by breaking them down into needs, wants and savings/debts. This way of categorizing and tracking your expenses is known as the 50/30/20 budget. » MORE: What's the range for average monthly expenses, and how do you compare?
3. Build a budget that works for your expenses
After categorizing your expenses, the next step to consider is creating a budget. A budget can help you take actions to reduce your spending where necessary. The 50/30/20 budget is one option, but there are other budgeting methods that might be a better fit for you, such as the envelope system or zero-based budgeting.
For the 50/30/20 budget, divide your net income into three categories: 50% for needs, including minimum payments on debt; 30% for wants; and 20% for savings and debt paydown beyond minimums.
Sorting your expenses into needs and wants can help you organize your budget and prioritize spending, especially if you need to cut costs to make room for savings or debt repayment. Here is a breakdown of each category in the 50/30/20 budget.
Needs
These are the expenses you cannot avoid, including monthly bills. If you use the 50/30/20 budget, these should account for 50% of your spending. Necessities often include the following:
Housing: Mortgage or rent; homeowners or renters insurance; property tax (if not already in the mortgage payment).
Transportation: Car payment; gas; maintenance; auto insurance; public transportation.
Health care: Health insurance; out-of-pocket medical costs.
Life insurance.
Utilities: Electricity; natural gas; water; sanitation/garbage; internet; phone.
Groceries, toiletries, hair care and other essentials.
Child care, child support or alimony.
Minimum payments on debt: credit cards; student loans; other loans.
Wants
These expenses, also called discretionary expenses, may be harder to account for in a budget, as they don’t always come with a set monthly fee. If you use the 50/30/20 budget, wants can account for up to 30% of your spending.
Clothing, jewelry, etc.
Dining out, special meals in.
Alcohol.
Movie, concert and event tickets.
Gym or club memberships.
Travel expenses (airline tickets, hotels, rental cars, etc.).
Cable or streaming packages.
Self-care treats, such as spa visits and pedicures.
Home decor.
Savings and debt repayment
This is the money you’re putting toward your retirement, emergency fund and other savings, and using to pay down high-interest credit card and payday loans. It also includes anything over the minimum payment on other debts, such as your student loans and mortgage. In the 50/30/20 budget, this should account for 20% of your income:
Emergency fund.
Savings account.
401(k).
Individual retirement account.
Other investments.
Extra debt payments on credit cards, mortgage, student loans, etc.
If you pay off your credit cards in full each month, classify the expenses according to what you buy — groceries under needs, for example. However, if you maintain a balance and are accruing interest and fees, list payments beyond the minimum under debt repayment.
Every few months, revisit your budget and adjust as necessary.
4. Use budgeting or expense-tracking apps
Consider using a budget app to track your expenses and save time. Budgeting apps are designed for on-the-go money management. They let you allocate a certain amount of spendable income each month, depending on what you’re taking in, and what you’re paying out.
These types of apps will work if you’re willing to log your purchases, put in the time and stick to your budget. The key is to regularly monitor your expenses. Consider setting a schedule for yourself, such as reviewing your budget on a monthly or quarterly basis.
NerdWallet has also identified the best expense tracking apps based on ratings and popularity among users.
5. Explore other expense-tracking methods
Not a fan of apps? A spreadsheet is another valuable money-tracking tool. You can find a variety of free budget templates online, and NerdWallet also offers an online budget worksheet.
If you have a more complex financial situation, such as investments or a small business, you might consider Quicken, which lets you import bank transactions and monitor your investments. Quicken offers desktop software with extensive budgeting and tracking features.
6. Look for ways to lower your expenses
As you track, be ready to make adjustments. Lowering the big fixed expenses in your life, like the cost of housing, vehicles and utilities, can make a significant impact on your budget.
Beyond that, check out additional ways to save money that can give you some breathing room.
7. Find ways to make more money
If you’ve exhausted your options for lowering expenses, you can try to make money to add more cash into your budgeting equation. You could take on a side gig, sell stuff online or explore money-making apps.
