Takeaways
- Tracking monthly expenses improves your chances of achieving financial goals.
- Expenses like recurring subscriptions and impulse purchases can be cut first.
- Bucket your spending in two major categories: fixed and variable expenses.
- Leverage top budgeting apps to track expenses and spending parameters.
- Reducing monthly expenses frees up cash to pay off credit card debt, add to your slush fund, invest in the stock market, and more.
One of the easiest ways to gain control of your personal finances is to understand where your money is going. In the daily flow of life, it's easy to get caught swiping your credit card, signing up for subscriptions, or purchasing items you don't need.
At-will spending leaves you with an uninformed view of where your money is flowing and doesn’t provide an accurate picture of your finances. Creating a budget and devising other mechanisms to track your expenses will increase your ability to reach your financial goals and improve your saving habits.
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5 Benefits to Tracking Expenses
Knowing where your funds are flowing daily and monthly will illuminate where you are crushing it financially and spotlight areas for improvement. Here are five benefits to consistently tracking your expenses:
- Master Your Spending: One of the best smart money moves is to decide to master your money instead of letting your money master you. Tracking your daily or monthly spending allows you to take control of your finances and inject financial autonomy into your life.
- Paying Off Debts: Mapping where your money is flowing each month will give you the insights you need to shift your budget spending to pay off credit card bills, make your car payment on time, or reduce a personal loan balance. Becoming debt-free will clear up your credit utilization and simultaneously improve your credit score.
- Saving More: Saving cash is one of the easiest ways to improve your financial health. Creating an emergency fund or slush fund will distance you from a financial disaster and allow you to handle unforeseen expenses nimbly. Tracking your expenses lets you pad these accounts more.
- Retiring Early: No one wants to work forever. With an acute understanding of where your money is going, you can start saving for an early retirement. This retirement savings strategy can help you travel more, change careers, and let you live the life you want.
- Achieving FIRE: You can hack the system by dedicating yourself achieving financial independence. Financial independence, retire early (FIRE) is a financial movement that focuses on being intentional with your spending to save more and achieve financial freedom.
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7 Ways to Track Monthly Expenses
Here are seven easy-to-implement solutions for reviewing your spending quickly and efficiently:
1. Check Your Credit Card Statements
Past spending patterns can be very indicative of future spending. There is no better place to look at your spending habits than by pursuing through your checking, savings, and credit card statements (most people have at least four).
We recommend getting out a highlighter and budgeting your spending into two main categories: fixed and variable costs. Fixed costs are the “must have” expenses that don’t change with your level of consumption, like rent or your car note. Variable costs, on the other hand, seesaw with your level of consumption. Variables expenses include clothes, entertainment, and dining.
You can adjust your level of spending quickly with variable expenses, but your fixed costs might take a while to cut. From here, you want to bucket your expenses under each category.
Read More: How to Apply For a Debit Card
2. Bucket Your Expenses
Once you segment your expenses between fixed and variable costs, categorize them into more specific spending buckets.
Label each expense, such as "entertainment" or "transportation/car." Some budgeting apps will automatically do this for you after you upload your account statement. They might even flag recurring or upcoming subscription fees (so you can cancel unwanted subscriptions early).
Most savers struggle with how much to allocate to each category of spending. Luckily, budgeting systems like the 50/30/20 budget assign a percentage of your monthly expenditures to three buckets: needs, wants, and goals. Check out our 50/30/20 Budget Calculator.
50/30/20 Budget Calculator
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The 50/30/20 Budget
3. Choose a Budgeting System
Finding the right budgeting system is like finding the right partner. The perfect solution works to bring out the best qualities in you.
Budgeting systems vary tremendously, but the critical point is that you have one. Here are several to evaluate:
- Passion Budget: Aligns your spending with your passions and doesn’t assign hard-set percentages.
- 50/30/20 Budget: This budget splits your monthly spending into three categories: 50% for needs, 30% for wants, and 20% for goals.
- Envelope Budget: You cash out every paycheck and put cash into spending envelopes (literally). Once the money you spend the allotted money for a category, you are not allowed to spend more until your next paycheck.
- Zero-Based Budget: This budget assigns a purpose to every dollar of income. Whether saving, paying for a car note, or going out to dinner, every dollar has a purpose. The percentage allocation, however, is up to you.
Try This: 16 Budgeting Tips Anyone Can Follow and Save Money
4. Find a Budgeting App
Mobile budget applications have improved tremendously and allow you to track your monthly expenses on the go. Depending on your settings, you can receive updates and push notifications about spending patterns, credit updates, savings progress, and investment goals.
In a recent survey, over 93% of Millennials and 90% of Gen X prefer to manage their banking in one place.[1] With easy-to-use interfaces, budgeting apps have become the tracking method of choice.
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5. Cut Pesky Subscriptions
One of the largest pain points for most budgets is sneaky recurring subscriptions. These subscriptions are usually low-dollar amounts, between $10 and $30, and don't necessarily grab our immediate attention.
Once you start reviewing your credit and debit card account statements, these subscriptions tend to jump out at you because of how quickly they add up. For example, a $20 subscription for a service you never use quickly morphs into $240 you could have used to meet other financial goals, like starting to invest or saving for retirement.
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6. Schedule Weekly Check-ins
Setting regular check-in times is essential to tracking your monthly expenses effectively. To ensure you are monitoring your spending, you can schedule a meeting with yourself on your calendar, create a buddy system, or work with a financial advisor.
Preset and consistent check-in times give you the leisure to live your day-to-day life while holding you accountable for your monthly expenses. Setting the goal posts between check-ins weekly or biweekly creates a forcing function toward smart money moves.
7. Monitor Daily Spending
Where your money flows daily is vital to keeping a reasonable pulse on your finances. You can use budgeting apps to give you automatic notifications if you spend more than you budgeted per day or set your banking app to ping you when you are spending limit in a certain category exceeds your budgeted amount.
Tracking your monthly spending daily provides the granular level of detail you need to adjust decisions on the fly. It can also help curb frivolous spending because you are paying daily attention to your overall financial goals.
Try a Spending Fast
One of the quickest ways to see where your money flows each month is to start a 30-day no-spending challenge. This challenge will highlight areas where you have an impulse to spend, illuminate excellent and bad money habits, and allow you to reset spending patterns.
No-spending challenges are easy to start and require no money. Get into a better financial mood by starting one today.
Learn How to Earn More Money
Tracking your monthly expenses is only one part of the solution. If you want to improve your financial situation, you can also increase your monthly income. Here is how to add cash to your monthly budget:
- Get a Promotion: Earnings more money can alleviate the stress of increasing expenses and inflation. Leverage your current employment to learn how to get a raise.
- Add a Side Hustle: While promotions are an ideal way to increase your base income, getting a side hustle can immediately add more monthly income. Read about our 29 Side Hustle ideas.
- Start An Online Business: Starting your own online business gives you more autonomy, workplace flexibility, and a potential boost in earnings. You can leverage success at your side hustle and convert it into a full-time job. Starting an online business can put you in command of your future.
- Advance Your Career: Career management is a long-term commitment to gradually refining your skillsets, continuing education, and mastering your profession. The dividends from persistent career management will translate into higher salaries and total compensation packages. Read about How to Advance Your Career in 9 Simple Steps.
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Smart Summary
Tracking your monthly expenses is one of the best ways to become financially conscious. You can work with a budgeting app or adopt a new budgeting system to make the process easy. Once you master where your money is going, you can start developing smart money goals. Once you set your financial goals, you can automate your finances to achieve your goals even faster.
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Frequently Asked Questions
Frictionless forms of payment like credit cards, payment apps, and debit cards make it difficult to feel where your money is going each day. While a $4 cup of coffee doesn’t seem like it breaks the bank, over the month, that $120 could have paid off your credit card minimum balance. Simply put, tracking your spending improves financial outcomes and creates intentionality.
There is no perfect budgeting system; there is only the best system that works for your personal situation. If you like having a percentage of your budget allocated to needs, wants, and goals, check out the 50/30/20 budget. You can also try approaches like the Envelope Budget, Zero-Based Budget, and more
Check out Smart Money’s recommendations for the top budgeting apps.
(1) Chase. Consumers Rely More and More on Mobile Banking, New Chase Study Finds. Last Accessed January 13, 2025.
