Keeping track of your expenses might seem like a daunting, monotonous, or giant task, but once you get over the initial setup, which is really quite simple, all you have to do is stay on top of new expenses.
Here is a simple, step-by-step guide to keeping track of your expenses, so that you can rest easy knowing that you’re on-budget and that your personal finances are organized.
Step 1: Download your monthly bank statements for the past year
For those of us who use online banking, this should be a relatively simple task. Go into your online bank accounts, select a particular month, scroll to the download option, and download your income and spending for that month. Do this for every month over the last year, let’s say. I personally download a CSV file. Do the same for every account, including your credit cards—and rename each download for easy access.
Step 2: Categorize your spending
As a Google Drive user myself, I copy and paste the downloaded information from my chequing accounts and credit cards for a particular month into a Google Spreadsheet. There are many great apps to help you categorize and track your expenses, however. Organize it by date, description, cost, category, and income. Here is an example:
|July 1, 2019||Landlord||$1,000||Rent||N/A|
|July 1, 2019||Local cafe||$5.00||Coffee||N/A|
|July 1, 2019||ABC Grocery||$75.00||Grocery||N/A|
|July 1, 2019||Direct deposit||N/A||Income||$2,000|
|July 2, 2019||Hydro||$30||Bills||N/A|
|July 2, 2019||Shops!||$50||Shopping||N/A|
Once you’ve gone through your spending and income, organize each month by category to help you total all of your spending and income. Do this for the last 12 months and add up each category cost. This is where you may find that you’re spending too much on shopping and coffees, for example, compared to your biweekly income.
Step 3: Set up a budget
Having your expenses laid out over the past several months will provide a quick picture of whether your income matches your spending habits. There are many helpful budgeting blog posts out there, however, one great rule to follow is the 50/30/20 budget strategy.
- 50% of your income should go to the essentials (ie. rent, bills, groceries, etc.)
- 30% of your income should go to lifestyle (non-essentials)
- 20% of your income should go to savings and investments
Step 4: Download your monthly bank statements and compare against your budget
Based on our above example of expenses, let’s say that you make $4,000 per month in income via two biweekly payments of $2,000. If we’re following the 50/30/20 rule, here’s how that breaks down:
- $2,000 goes to the essentials (rent, groceries, bills, etc)
- $1200 goes to lifestyle
- $800 goes to savings and investments
Download your monthly bank statements for every month moving forward and see if this budget works for you. Keep track of your expenses on a daily, weekly, and monthly basis to see where you’re at with spending, saving, investing, and earning.
Step 5: Adjust your expenses accordingly
If you have $2,000 every month for essentials, for example, but your rent is half of that, do you still have enough for groceries, bills, and other essential costs of living? If not, what needs to adjust for you? Perhaps your income is too low or your rent too high for your lifestyle? Or perhaps you love your job and your place, so you adjust with how much you spend ($1200) on lifestyle? That is, you don’t shop or go out as much.
Keeping track of your expenses is essential for maintaining a healthy, stable personal financial situation. It’s good for your wallet and for your health, happiness, and wellbeing.