Tracking Monthly Expenses: The First Step to Money Success

When you start tracking expenses, you can separate your spending into three categories: needs, wants and savings.
5 Steps for Tracking Your Monthly Expenses

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Tracking your spending on a regular basis can give you an accurate picture of where your money is going — and where you’d like it to go instead.

Then, by using a budget, you can accurately account for all the bills you need to pay going forward. But before you start plugging numbers into a spreadsheet or app, take a minute to list out each of your monthly expenses.

Here’s how to get started tracking your monthly expenses.

Check your account statements

Pinpoint your money habits by taking inventory of all of your accounts, including your checking account and all credit cards you have. Looking at your accounts will help you identify your spending patterns.

Your spending will consist of both fixed expenses and variable expenses. Fixed expenses are less likely to change from month to month. They include mortgage or rent, utilities, insurance and debt payments. You'll have more room to adjust variable expenses like food, clothing and travel.

Categorize your expenses

Begin by grouping your expenses. Some personal finance websites and credit cards automatically tag your purchases in categories like “department store” or “automotive.” You might find that those impulse buys at Target are costing you a lot. Or maybe you’ll realize you’re paying for recurring subscription services that you could do without.

Before you build a budget
NerdWallet breaks down your spending and shows you ways to save.

Then, sorting those expenses into needs and wants can help you organize your budget and prioritize spending, especially if you need to trim costs to make room for savings or debt repayment.

Needs

These are the expenses you cannot avoid. If you use the 50/30/20 budget, these should account for 50% of your spending. Necessities often include the following:

  • Housing: Mortgage or rent; homeowners or renters insurance; property tax (if not already in the mortgage payment).

  • Transportation: Car payment, gas, maintenance and auto insurance; public transportation.

  • Health care: Health insurance; out-of-pocket medical costs.

  • Life insurance.

  • Utilities: Electricity and natural gas; water; sanitation/garbage; internet; cell phone and/or landline.

  • Groceries, toiletries and haircuts, and other essentials.

  • Child care.

  • Student loan payments; other minimum loan payments; child support or alimony payments.

🤓Nerdy Tip

If you find your budget is way out of whack, look closely at those items you’ve classified as needs and consider negotiating, refinancing or downgrading.

Wants

These expenses may be harder to account for in a budget, as they don’t always come with a set monthly fee. If you use the 50/30/20 budget, wants can account for up to 30% of your spending.

  • Clothing, jewelry, etc.

  • Dining out, special meals in (steaks for the grill, etc.).

  • Alcohol.

  • Movie, concert and event tickets.

  • Gym or club memberships.

  • Travel expenses (airline tickets, hotels, rental cars, etc.).

  • Cable or streaming packages.

  • Self-care treats like spa visits and pedicures.

  • Home decor.

🤓Nerdy Tip

Scan your spending for the past few months to get a sense of what your wants are and how much you tend to spend on them. Have each adult in your household do the same if you're creating a family budget. This exercise gives you a realistic baseline. You can use what you’ve learned to make small changes in your spending over time.

Savings and debt repayment

This is the money you’re putting toward your retirement, emergency fund and other savings, and using to pay down high-interest credit card and other "toxic" debt like payday loans. It also includes anything over the minimum payment on your "good debts" such as your student loans and mortgage. In the 50/30/20 budget, this should account for 20% of your income.

  • Emergency fund.

  • Savings account.

  • 401(k).

  • Individual retirement account.

  • Other investments.

  • Credit card payments (see budget tip below).

  • Extra payments on mortgage.

  • Extra payments on student loans.

🤓Nerdy Tip

If you pay off your credit cards in full each month, classify the expenses according to what you buy — groceries under needs, for example. However, if you maintain a balance and are accruing interest and fees, list payments beyond the minimum under debt repayment.

Build your budget

Add up your expenses for each category of needs, wants and savings/debts, then plug in your monthly net income below.

Every few months, revisit your budget and adjust as necessary. Consider using a budget app to track your expenditures, saving time as you build momentum with your new budgeting habit. If you get stuck, try these budgeting tips.

The 50/30/20 budget calculator

Budgeting or expense-tracking apps

Budgeting apps like You Need a Budget and Mint are designed for on-the-go money management, letting you allocate a certain amount of spendable income each month depending on what you’re taking in and what you’re paying out. These types of apps will work if you’re willing to log your purchases, put in the time and stick to your budget.

Depending on what you get out of it, a paid app may be worth the cost. You Need a Budget, for instance, is $99 a year or $14.99 a month (after a 34-day free trial), but it has appealing benefits, like its ability to sync transactions directly from your bank account and its option for live workshops with the company’s support team.

NerdWallet has also identified the best expense tracking apps based on ratings and popularity among users.

Explore other expense trackers

Not a fan of apps? A spreadsheet is another valuable money-tracking tool. You can find a variety of free budget templates online, and NerdWallet also offers an online budget worksheet.

Or, if you have a more complex financial situation, such as investments or a business, you might consider Quicken, which lets you import bank transactions and monitor your investments.

Quicken offers desktop software with extensive budgeting and tracking features and also has a mobile tool: the Simplifi budgeting app. Subscriptions are billed annually and average monthly costs for the desktop software range from $3.49 for the "starter" version to $8.99 for the home and business edition.

Identify room for change

As you track, be ready to make adjustments. Lowering the big fixed expenses in your life, like the cost of housing, vehicles and utilities, can make a significant impact on your budget. Beyond that, check out additional ways to save money that can give you some breathing room.

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