How to Track Expenses for Your Financial Plan

A man tracking his expenses for a financial plan.

Tracking your expenses is key to developing and maintaining a financial plan. Whether you’re paying off debt, building an emergency fund, or planning for retirement, monitoring your expenses gives you a clear view of your financial situation and keeps you on track to meet your goals. If you don’t have a financial plan yet, consider working with a financial advisor to create one that aligns with your goals.

The Importance of Tracking Expenses for Your Financial Plan

Tracking expenses is a basic part of financial planning. Monitoring where your money goes could help you see your spending patterns and identify areas where you can cut costs or reallocate funds. This process allows you to make decisions about budgeting, saving and investing based on actual data.

One of the key benefits of tracking expenses is that it helps you stay within your budget. Knowing how much you’re spending each month on essentials like housing, food and transportation, as well as discretionary items like entertainment or dining out, can make it easier to direct money to different needs and goals.

Additionally, tracking expenses can help you identify areas where you can cut costs. It’s easy to overlook small, recurring expenses that add up over time, like subscription services or frequent coffee purchases.

Finally, monitoring daily expenses can allow you to redirect the money that you save toward long-term financial goals like retirement, homeownership, or debt repayment.

Methods of Tracking Expenses for Your Financial Plan

A man researching ways to keep track of his spending.

Here are four common ways to keep track of your spending:

Manual expense tracking: This traditional method involves writing down every expense you make, either in a notebook or a spreadsheet. While it requires discipline and consistency, manual tracking gives you complete control over how your expenses are categorized. You can tailor your categories to fit your financial goals and get a granular view of your spending habits.
Envelope system: The envelope system involves dividing your budget into categories, such as groceries, entertainment and transportation, and placing the allocated amount of cash into separate envelopes for each category. Once the money in an envelope is gone, you can’t spend any more in that category for the month. This system helps you stick to your budget and physically see where your money is going.
Bank statements and credit card reports: Reviewing your bank and credit card statements is another simple way to track your expenses. Many banks offer monthly or quarterly reports that break down your spending by category. This method requires minimal effort, but it may not give you real-time insights into your spending habits.
Spreadsheets: Using a spreadsheet program like Excel or Google Sheets allows you to track your expenses digitally and organize them by category. You can set up formulas to calculate totals, averages and trends over time. This method is great for those who prefer a hands-on approach and want detailed records of their spending.

Apps, Tools and Other Resources for Tracking Expenses

There are many apps and tools that can help you track your expenses efficiently. Here are four popular options:

Mint: Mint is a free app that connects to your bank accounts, credit cards and loans to automatically track your spending. It downloads actual spending data, categorizes expenses for you and provides detailed reports on your spending patterns. Mint also offers budgeting tools and alerts to help you stay on track with your financial goals.
YNAB (You Need A Budget): YNAB is a budgeting app that focuses on giving every dollar a job. It helps you track expenses, create a budget and manage your cash flow. YNAB offers real-time syncing with your bank accounts, allowing you to see where your money is going and make adjustments as needed.
Empower: Empower is both an investment management tool and an expense tracker. It provides a holistic view of your financial picture by tracking your spending, investments and net worth. The app allows you to set spending limits, categorize expenses and monitor your progress toward financial goals.
PocketGuard: PocketGuard is an app that simplifies tracking by telling you how much disposable income you have left after accounting for bills, savings and goals. It automatically categorizes your expenses and provides a snapshot of your financial situation in real time, making it easier to manage your budget.

Bottom Line

A woman using an app to track her spending.

Tracking expenses is a key part of any financial plan because it helps you understand your spending habits and make informed choices about saving, investing and budgeting. Whether you track expenses manually, use a budgeting tool, or use apps, consistency is important. Reviewing your expenses regularly and updating your financial plan can help you stay on track to meet your goals and improve your financial health.

Financial Planning Tips

A financial advisor can work with you to create a personalized financial plan that outlines specific strategies for budgeting, saving and investing. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
In addition to tracking expenses, you’ll want to know how much you’re earning from your savings. SmartAsset’s savings calculator can tell you how much your account will be worth over time.

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