Expense Tracking Made Easy

1.      Choosing a method for Tracking Expenses

To track your expenses you need to keep a summary of all the expenses that you have incurred. Either you can do on daily basis, weekly or monthly. Please make sure that no expense is left out.

For that you can use papers, spreadsheet (Excel), or some mobile apps. Using loose papers will be sufficient only when you want to have a rough idea. But using the spreadsheet will be recommended. Mobile apps can also be convenient, but users should be cautious about privacy and potential fees. You should select apps with strong privacy policies to secure personal information. You can either use Google sheets or excel spreadsheets. 

2.      Recording Expenses Promptly

It is really necessary to make sure that every expense is recorded. You may write down your expenses as and when you have incurred. And, also at the end of a particular period according to your suitability you can reconcile them with your bank statements if you have made use of online channels or the cash that you have used. Waiting too long can lead to forgetting or misreporting transactions. Reconciling expenses with bank statements helps ensure accuracy. Also, make sure to enter correct amounts. Don’t mix up the amounts of expenses as in the end it will lead to wrong conclusions.

3.      Categorizing Expenses

After recording all your expenses you need to categorize into heads. These heads should be around 10 to 15. More heads will only make it difficult for a proper analysis of your budget planning. The categories you provided are comprehensive and cover various aspects of personal finance. It is essential to customize these heads on individual spending habits and financial goals.

 a.      Education

b.      Transportation

c.      Milk or food Expenses

d.      Electricity Expenses

e.      Utilities (ex. Phone bills, TV, OTT, other monthly utilities)

f.       Debt Payments

g.      Entertainment

h.      Clothing and Personal care

i.       Insurance

j.       Taxes

k.      Miscellaneous

This will help you to know where are you spending the most, how frequently and how much.

4.      Analyzing Expenses and Budgeting

Understanding where your money goes allows for informed decision-making. Budgeting helps prioritize spending and identify areas where adjustments are needed. Regularly reviewing budgets ensures they remain aligned with financial goals. Your budget will guide your spending and help you stay on track.

This is how your budget will be set. Always make sure to have a reserve or a pool of money in case of emergency. And a necessary portion for your savings should be set aside.

5.      Reviewing and Adjusting Budgets

Flexibility is key in budgeting. Circumstances may change, requiring adjustments to spending plans. Identifying overspending areas and finding ways to reallocate funds contribute to financial stability.

6.      Avoiding Debt and Prioritizing Savings

Living within one's means and avoiding unnecessary debt are crucial principles of financial management.  But Good Debts such as mortgages or student loans, can be strategic investments in one's financial future. Please remember to spend only that amount which you earn after setting a percentage of amount for your future savings. Don’t go on taking debt or advance from your friends or families for unnecessary expenses, this is how someone caught under debt under, it is like a financial suicide.

7.      Consistency and Habit Formation

Consistency is key to the success of any financial management system. Developing the habit of tracking expenses regularly contributes to financial awareness and control.

DICLAIMER: The views expressed are those of the author and may not represent the views of others.