3 Steps to Tracking Your Spending (and Saving Lots of Money)

Learn where exactly every penny goes to become smarter with moneyBy MP Dunleavey, Editor of DailyWorth.com

What's the Payoff?
A better quality of life. Once you know where your money is actually going (not just where you kinda think it might be going), you make better spending choices.

Why You Shouldn't Avoid It

Budget leaks will drain your coffers. When you fritter away your money on things you don't really care about, you won't have the capital to pay for your true priorities. Photo by Getty Images

Related: Learn about 9 buys that are cheaper online.

1. Pick Your Method
There are probably two dozen ways to track your cash, but they're all versions of one of the following:

The manual method
You jot down everything you spend, ideally as you spend it.

Go this route if... you love lists and you think you'll be consistent about whipping out a notebook every time you pay for something. You can also keep receipts and tally them later, but you'll be more accurate if you do it on the spot.

The software solution Use a program like Excel, Google documents or Quicken to type in your purchases and download your credit card charges.

Go this route if... you're detail-oriented and patient, and get a kick out of corralling everything in one place. You'll need to keep receipts and be fastidious about inputting that $1.50 chew toy from Petco.

Websites or apps
Use a free, full-service tracking and budgeting site like Mint, Buxfer or BudgetPulse. Many of these also have mobile versions you can use on your phone.

Go this route if... you feel secure storing your personal data on the sites (they can't access your money), and you will enjoy monitoring your expenses using nifty tools and calculators to set goals and budgets.


Pick a method that appeals to you and give it a go for a couple of weeks. If it doesn't work for you, switch. The idea is to find a way that you'll use regularly to check in with your cash. You don't have to love it, but it shouldn't make you want to crawl into bed and pull the covers over your head.

Related: Check out 10 things you didn't know you could rent.

2. Analyze it!
Now the fun begins (at least, I find this stuff fun!): No matter which method you choose, you'll immediately start to see your spending patterns (Diet Coke at 4 P.M.? Online "browsing" that resulted in three new pairs of shoes you don't need?). That's because we're all creatures of habit when it comes to spending. The point of monitoring your cash flow is to get a bird's-eye view of which habits are doing more damage than you realized.


After you've given your chosen method a couple of weeks, sit down and take 30 minutes to look at the numbers and notice where you spend the most. If you're using the manual method, you'll need to take out a calculator and add across a few categories (groceries, eating out, clothes, etc.). If you're using a computer, tallying up a selection of areas is almost automatic. Brace yourself: You're going to be surprised to learn where your money goes, because we all have at least one or two spending blind spots.

Related: Discover 9 bad habits that are good for you.

3. Plug Your Budget Leaks
Start out by pinpointing the discrepancy between your conscious priorities and how you actually spend your money.


Remind yourself what your priorities are for this year: paying down a home equity loan? Saving for a family vacation? Then, look at where your money is actually going. If you're not channeling much cash toward your goals, but you are burning $80 a month on takeout (easy to do, at $20 a week!), you can start making the changes necessary to funnel your money where it rightly belongs.

There is something about seeing what you are spending in black and white-on the page, or on-screen-that inspires financial clarity. Knowledge is power: Now you have the power to get more of the life you want out of the money you have.

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