If the answer is no then it’s time to open up your favourite spreadsheet tool and get cracking. Or, more likely, download any one of the countless financial apps that can look over this side of money management for you.
But whether you decide to do things manually or by making use of shiny new technology, the outcome should be the same: a daily record of your real spending.
Doesn’t my budget already do this?
Not really. A budget lets you calculate how much you should be spending within different categories based on your needs and income. This is great because it gives you a target to work towards and a good sense of where your money should be going. What it doesn’t do, however, is actively track the reality of your day-to-day spending. This is where a tracker comes in. By logging every latte, train ride and impulse purchase you can get a really good sense of where your money is really going.
What are the benefits?
There are several ways in which financial tracking can help you to manage your money more effectively:
- Improve your budgeting. When first creating a budget, it’s common to go over the past few months’ spending to figure out how much you should be allocating for different things like food or travel. However, your calculations are unlikely to give you the full picture. By tracking your spending on an ongoing basis, you can make tweaks to your budget as and when they’re needed.
- It provides motivation to start cutting back. Once you start tracking what you buy, you’re holding yourself to account for every purchase. This makes it a lot harder to simply overlook how much you’re spending (or overspending) on treat items like takeaways. Making yourself take responsibility for your spending decisions is a great way to give yourself a much-needed kick into gear – especially when you combine it with a calculation showing just how much those unnecessary expenses add up over time.
- Realign your spending with your personal values. What really matters to you in life? Do you care about looking smart and presentable? Giving money to good causes and supporting others? Eating well and maintaining a healthy lifestyle? By tracking your spending, you can work out whether you’re actually investing in the areas that mean the most to you.
Where should I start?
If we’ve managed to convince you that tracking spending is a good idea then you have one of two options, as we mentioned at the start – create a spreadsheet or download an app to automate the process:
- Modern app-based bank accounts like Monzo, Starling or Revolut (see the screenshot above), will usually track your spending for you by automatically assigning labels to your purchases. This is great if you use their account, but no good for people who are still banking with a traditional bank or splitting their spending between multiple accounts.
- Connect to an app like Money Dashboard. If you’re happy to connect all of your accounts to an online tool then this is probably the easiest way to do things. After you’ve connected your banks to the app, it will automatically categorise your spending and serve up tasty insights.
- Using a spreadsheet. This will be a lot more work, as you’ll need to manually go into your sheet each day to make a note of what you’ve spent. The set up doesn’t need to be complicated, though. You simply need a tab for each month with the dates down the side and categories along the top. Add the amount that you spend in each category every day, and include either weekly or monthly totals (we recommend weekly, especially at first).
That’s it! Tracking your spending doesn’t need to be complicated, and it can really make a difference in the way that you view your money. Let us know how you get on.
Run a business and want to efficiently and easily track your spending? Check out our list of app-based business bank accounts.