Keeping track of spending habits can seem challenging, but it doesn’t have to be complicated. There are many great reasons to find a method that works for you. Why?

Tracking spending is an opportunity for you to visualize the big picture and be in charge of where your money is going. With that knowledge in hand, it will be easier to make informed budget choices today — and plan for financial goals tomorrow.

The good news? There are many easy ways to keep tabs on spending successfully. Here are some guidelines on how to approach it, and five expense-tracking methods to consider.

Why Should You Track Your Spending and Expenses? 

Pinpoint exactly where your money goes

While most of us probably have a pretty good idea of our biggest expenses — like rent, mortgage, or car payments — we may be fuzzier on the details of every dollar we pay out each month for everything else. That’s not uncommon, according to The Penny Hoarder 2021 Survey on Spending and Budgeting Habits. In fact, the poll found 56% of us don’t know exactly how much money we spent in the last month.

Because keeping track of expenses is a foundation of budgeting, pinpointing where your money goes is an essential step toward making your money work smarter.

Spot areas for improvement

Tracking spending can be informative, motivating, and surprising — all at the same time. That’s because you may notice that you’re spending more than you think for certain things. And maybe you’ll shed light on money priorities that are inadvertently slipping through the cracks.

Two in five Americans, for example, say they don’t realize how much they’ve spent on their credit or debit cards until they read their monthly statements, according to recent research by the American Institute of CPAs.

Boost money management success

Until you’re aware of what you’re actually spending, you won’t be able to figure out which areas you may need to plump up or rein in to meet your goals. With a spending benchmark in front of you, you’ll be able to reset priorities if necessary and better balance how you allocate your funds.

What’s more, tracking spending simply forms the basis of a meaningful budget. And that puts you in the driver’s seat of your own personal finance decisions.

How Do I Track My Spending? 

Gather account statements and receipts

Where do you start when tracking spending? The first step is gathering the proof: grab or download the most recent full month’s statements from your bank checking accounts and credit card accounts. Then, collect receipts or keep a tally of your daily cash or weekly debit card spending, too. For a deeper dive, try tracking expenses for two weeks, a month or longer so you get a wider view of spending trends to compare. Plus, you’ll also want to include periodic bills that are paid semi-annually or quarterly, such as insurance premiums.

Group expenses by category

Next, organize your spending amounts into broad categories. (Some credit cards automatically do this sorting for you). Your list may include essentials, like housing, utilities and groceries, and flexibles, like entertainment, dining out and clothing.

You may find it helpful to use the Spending Tracker tool from the Consumer Financial Protection Bureau — an easy worksheet for sorting expenses into categories.

Record and evaluate

Now you’re ready to take stock of how much you spent in each category every month. What expenses surprised you? Are you paying more than you thought for certain things that you’re not really using? Do you see any categories where there’s room for change?

To make the task easier, let’s look at how to keep track of spending with a strategy that works for you.

What Are 5 Good Ways to Keep Track of Your Expenses? 

1. Manual method

Some people prefer an active, hands-on approach to money management. Whether it’s a little spiral notebook you carry with you or a binder you tuck expense records in, some of the simplest ways for tracking spending employ nothing more than pen and paper.

With the notebook plan, the idea is to log each time money leaves your wallet. The binder method keeps expense notes, receipts, statements, and expense worksheets organized in one place so that you can more easily reconcile what’s happening on a weekly, monthly, or even yearly basis. Add 3-ring pocket folders as needed to corral your different expense categories.

2. Calendar plan

Keep a separate money calendar and put it to work to track your spending. Use it to jot down daily, weekly, and monthly expenses as they occur. With this method, you’ll be able to quickly spot spending trends and opportunities to save money.

For example, you might notice spending ramps up on the weekends when you and the family get more take-out food and stream movies. And you can also use your money calendar to mark due dates and amounts for bills in one easy-to-see place.

3. Spreadsheet system

Expense tracker spreadsheets, which you can create from scratch in Microsoft Excel or Google Sheets, can help you customize a table of rows and columns to arrange, store and automatically calculate your own personalized spending categories in timeframes you choose. Within these ledger-type tools, there are all kinds of ways to highlight expenses that will help you visualize and analyze the full picture.

For instance, you could color code different spending categories, say red or green, depending on whether the amounts were higher or lower than you anticipate. Spreadsheets require ongoing maintenance to keep things entered and tallied, but they can deliver a practical level of detail into your cash flow over time.

4. Template technique

Ready-made templates require less setup than the spreadsheet system. By using built-in formatting from either Microsoft Office or Google Drive Sheets, you’ll be able to get started sooner. Other free or pre-installed programs may already be on your device: Google Sheets (for Android, iOS and web) and Apple’s Numbers software for iOS, macOS and web are two. What’s more, you can access and edit your template from your phone, tablet, or computer — and share it, say, with a spouse, to work on it at the same time.

Popular Microsoft templates within its financial management category include an expenses calculator and a personal money tracker. And Google Drive’s Sheets also offers a gallery of templates — including monthly and annual budgets — that you can browse when you sign into your account. After you choose your starter template, you can fill in your numbers for a quick accounting of where your expenses stand.

5. App approach

If you’d rather automate the collecting and calculating, there are many spending trackers and budget apps to choose from that handle a lot of the work for you. Budget apps like Mvelopes, Simplifi, or You Need a Budget (YNAB) allow you to track expenses right from your smartphone so you can easily keep tabs on your monthly expenses and budget.

These expense tracker apps let you set up different spending categories and sync directly to your bank account, credit card account or other financial accounts if you choose. In that way, they can automatically sort spending for you, which might be helpful if, say, you forget a one-time purchase occasionally. And some apps let you build watchlists, alerts and limits to better manage the spending that’s important to you.

The Bottom Line 

No matter which method you choose, making time to keep track of spending can uncover valuable insights about where your money goes. Not only can it identify places to improve, but tracking expenses also shows where you’re right on target. From pen and paper to mobile apps, the key to success is to pick an easy-to-use approach that suits your style and financial life.