This is a simple system for tracking expenses that I learned from a good friend of mine. All you need is two things:
- A spreadsheet (I use Google sheets but Excel works fine too)
- A small amount of discipline to do it each day
Why track your expenses?
Before I started tracking expenses, I would sort of guess how much money I was spending and where it was going. I thought my guessing was pretty accurate, but in truth I only had a vague idea. Unfortunately, it seems like this is the approach most people take.
Without a tracking system, you are just making “educated guesses” about your spending habits. It’s based on unreliable memory and is probably not very accurate.
Unless you are doing some form of expense tracking already, it is highly likely that you are spending more money than you think.
And if you do have an existing system that works, then that’s great. But as someone who didn’t grow up with a lot of financial awareness, starting to track my expenses this way was a game changer for me.
Stop Blindly Spending Your Money
If you don’t track anything, it’s quite easy to spend money offhand on things you don’t need, or that don’t matter, and then completely forget about it later. You also don’t really know how much money is being allocated towards different areas of your life.
In worst case scenarios, you have people who are constantly asking, “Where did all my money go?” and they really have no idea. (If this is you then you definitely need to start tracking your expenses)
But if you track everything on a spreadsheet, then later on you can look at your finances and it will all be there, down to the dollar and clear for you to see.
While I don’t really advocate frugality, doing this probably will save you money. What’s more important though, in my opinion, is that it makes you 100% aware of exactly where your money is going. There is huge value in simplifying processes like this.
Taking a vague approach to something as important as your finances really makes no sense, especially when there are easy and readily available ways to quantify and track it.
Use this simple spreadsheet system
So here is the system my friend showed me, it’s very simple.
On a spreadsheet, label the first three columns for the date, the amount of money spent, and for what it was spent on. Then every day, simply fill in the columns. At the bottom you can have a cell for your total expenses, and you can also have one for the average spent per day.
Here’s what that looks like:
You can add expenses to the spreadsheet throughout the day as they accumulate, or all at once in the evening. A good way to avoid forgetting anything is to just keep your receipts, and only throw them away once they’ve been added to the spreadsheet.
You could keep one of these spreadsheets for each month, or year. Personally I organize them by where I’m staying, and start a new one every time I change location.
That’s it! If you implement this habit, I can almost guarantee that you will notice a difference in your awareness and behaviour within a very short time—a few weeks or even days.
Again, this is very basic but I have found it extremely useful, which is why I’m posting it here. Give it a try, I hope it will prove the same for you. Thanks for reading.
Do you track your expenses? What kind of system do you use? Any ideas for how I could improve mine? Let us know in the comments section below.