If you want to win with money, you must adjust your money-related actions and have track of income and expenses. Making and keeping to a budget is one approach to accomplish this. And one method to do it is to keep track of your expenses.
This is the key to turning your budget’s good intentions into fantastic results. So, let’s discuss how to keep track of your costs.
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How to Keep Track of Income and Expenses?
Keeping track of your costs isn’t difficult—it’s a habit. And, like other key habits, such as flossing, it takes some effort and repetition to transition from attempting to remember to doing it naturally. But you’ll make it. Your teeth, as well as your wallet, will thank you. Simply follow the steps below.
The first step is to make a budget:
Without one, you won’t be able to keep track of your costs. What exactly is a budget? It’s your monthly financial plan, in which you assign a task to every dollar that comes in during the month, whether it’s spending, saving, or giving.
Budgets have a poor reputation. Is a budget too restrictive? The truth is that you control your budget, not the other way around.
Make a list of your earnings: Track of Income and Expenses
Make a list of every paycheck you’ll receive this month. (Don’t forget about any extras, such as that side gig!) Add everything up. This is the amount of money you have this month!
Do you have a fluctuating income? Take a look at what you’ve accomplished in the last few months. This month’s planned income should be the smallest amount. In a moment, we’ll go through this in further detail.
Make a list of your spending:
It’s time to make a budget for everything you’ll be paying this month. In this sequence, list your expenses:
Providing (10 percent of your income)
Cost-cutting (depending on your Baby Step)
Food, utilities, shelter/housing, and transportation are the four walls.
Other necessities (insurance, debt, childcare, etc.)
Deduct your expenses from your earnings.
This must be equal to zero. That’s fantastic if you have any money left over! Use it to help you with your current Baby Step (the proven, guided path to saving, paying off debt, and building wealth). If you have a negative number, reduce your anticipated totals or eliminate extras until the number is zero.
This is referred to as zero-based budgeting, and it entails assigning a task to each and every dollar you earn. That way, it will work just as hard as you
Now that you’ve created your budget, you must stick to it. This is where the tracking comes into play!
Keep Track of Your Earnings:
Put your regular paycheck in the income section of your budget when it arrives. Log in any money you make from a side hustle or selling anything.
If you have an irregular income, this step is critical. Remember, when you declared your income, you planned low. So, if your earnings turn out to be higher than expected, now is the time to make adjustments. You can either add money to your current budget lines or cover some budget excesses.
Even if you have a steady income, keep track of it! For starters, you can double-check that your paycheck is correct. For two reasons, it’s still another technique to help you stick to your budget.
If you spend money, keep track of it:
Keep track of every penny you spend. Throughout the month.
Subtract the cost of filling up the petrol tank from your transportation budget line. Subtract the rent expense from your housing line when you pay it. Subtract the cost of tickets to witness your favourite boy band’s reunion tour from your entertainment budget.
You see what I mean. Track any money that leaves your wallet, bank account, PayPal account, cash envelope, coin purse, or old-fashioned piggy bank.
Make sure you’re subtracting as well as tracking. Then you’ll be able to see how much money you have left in each of your budget categories. This is where the magic happens because this is where you keep track of your expenditures to avoid going overboard!
Also Read: 5 personal finance thumb rules for better financial planning
Establish a Consistent Tracking Routine
Regularly keep track of your expenses. It could be once a week, at the end of each day, or just before leaving the grocery store parking lot.
Whatever works best for you in terms of keeping track of all of your expenses and preventing paper receipts from getting lost in that kitchen drawer must be a portal to another realm.
If you’re married, make sure you’re both working from the same budget and keeping track of your spending. This is excellent for communication and accountability.
Four Methods for Keeping Track of Your Expenses:
Pencil & Paper- The most significant advantage (apart from not requiring access to technology) is that physically writing things down takes an active mind. And when it comes to money, active minds are really beneficial.
Envelope System- When you use the envelope system as your expense tracker, you can see when the envelope is running low and know when to cut back on spending. You’re done spending when the envelope is empty. Your money is effectively on its own path.
Spreadsheets on a Computer- Many people are spreadsheet aficionados, and they’ll go on and on about the benefits till the end of time. Spreadsheet budgets provide many advantages, including a large number of templates, the opportunity to modify your budget, and the convenience of having the math done for you on the screen.
Budgeting Apps- You’ll always wonder where your money went if you don’t keep track of it. However, if you equip yourself with the correct equipment, you may go beyond good intentions and achieve financial success.