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Published February 7, 2023
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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.

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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, using a budget, you can account for all the bills you must 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 everything you pay for each month.

Check your account statements

Pinpoint your money habits by taking inventory of all of your accounts, including your everyday 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 home loans or rent, utilities, insurance and debt payments. You’ll have more room to adjust variable expenses like food, clothing and travel.

Categorise your list of expenses

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

Then, sorting those expenses into needs and wants can help you organise your budget and prioritise 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: Home loan or rent; home or renters insurance; property taxes and other fees associated with owning a home.
  • Transportation: Car payment, petrol, maintenance and car insurance; public transportation.
  • Health: Private health insurance; out-of-pocket medical costs.
  • Life insurance. Individual or employer-based policies.
  • Utilities: Electricity and natural gas; water; rubbish collection; internet; mobile phone and/or landline.
  • Living essentials: Groceries, toiletries and haircuts, and similar expenses
  • Child care. After-school care, babysitting or extra-curricular activities.
  • Loan repayments. HECS; 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 discretionary 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, jewellery, etc.
  • Dining out, special meals (steaks for the BBQ, etc.).
  • Alcohol.
  • Movie, concert and event tickets.
  • Gym or club memberships.
  • Travel expenses (plane tickets, hotels, rental cars, etc.).
  • Streaming packages.
  • Self-care treats like spa visits and pedicures.
  • Home decor.

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 cards and other “toxic” debt like payday loans. It also includes anything over the minimum payment on your “good debts” such as your home loan. In the 50/30/20 budget, this should account for 20% of your income.

🤓 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 accrue interest and fees, list payments beyond the minimum under “debt repayment”.

Build your budget

Create a budget by adding up your expenses for each category of needs, wants and savings/debts, then compare it to your monthly after-tax income. Make sure to consider which expenses and fixed and variable and plan accordingly.

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.

» MORE: How to Get Out of Debt

Budgeting or expense-tracking apps

Budgeting apps like GoodBudget, Money Brilliant and Frollot 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.

Some apps allow you to sync transactions directly from your bank account and automate part of your budgeting.

🤓 Nerdy Tip

Not a fan of apps? A spreadsheet is another valuable money-tracking tool. Just be sure to update it regularly — like once a day — to stay on top of your monthly expenses. 

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 significantly impact your budget. Beyond that, check out additional ways to save money that can give you some breathing room.

If you’re in the United States, read this article on the NerdWallet US site.

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