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How to Track Your Spending

The easiest way to see where your hard-earned money is going each month is to track your spending. Luckily most banks today take care of that for us. If you don't already, I encourage you to use your banking institution's app. If you're more old school, then you can simply print off your most recent bank and credit card statements and use a couple of highlighters to see where your money is going. Perhaps you'll highlight all food purchases in one color, gas in another color, and any restaurants or drive-thrus in a different color. That way you can easily total each category to see where your money goes.

To be sure you're really capturing all of your spending, you'll need to acknowledge all of the different payment methods you use in a given month. Perhaps you use cash sometimes, your debit card other times, and a credit card here and there. It's important to track all forms of spending so that you see the big picture. Sometimes this can seem daunting, so people put it off. I urge you to be honest with yourself about how much you spend so that you can make a budget that aligns with your priorities.

Here are a few ways you can track your spending:

Cash - If you typically use cash, simply jotting down on a piece of paper where you spent it, the date, and the amount is all you need to be able to track and total it. You can track it for one week or one month. If you mostly pay for things in cash, I highly recommend the envelope system by Dave Ramsey. It can change your life and help you reign in and track your spending.

Cards - If you're like most people, you probably use a debit or credit card to purchase stuff. This can make tracking your spending really easy! You simply print off the bank or credit card statement and color-code purchases by category, as I mentioned earlier. Then you can total them to see exactly how much you're spending in each category.

A little of both - This is probably where most people fall. They use cash for some things and cards for others. This can be tricky and will require a little more effort if you really want a true glimpse of your spending habits. I would recommend you stick to one form of payment for an entire week (or month) so that you can track it all in one place. It can get confusing trying to total up amounts from too many payment sources.

Don't want to bother with printing bank and credit card statements and color-coding them? Download an app instead! Let technology do the work for you. There are plenty of free apps to help you track your spending if you're interested.

My favorite is called Empower, but it used to be called Personal Capital. Most of the features are free and it gives you a broad look at your finances. You can't hide from the truth with this app! It will put your spending all in one place once you link your bank account(s) and credit cards. You'll know exactly how much debt you have and exactly how and where you spend your money. Empower does make money by selling investment advice, but you can choose for them not to call you when you set up your account. Mint is another good app and is also free. I have both because they offer different insights and allow me to see my finances differently. There are plenty of other apps, but they do cost money. Most will give you a free trial. If you're interested, the ones I recommend are YNAB (You Need a Budget), which gives you a 34-day free trial, and Dave Ramsey's Every Dollar, which offers a 14-day free trial.

Tracking your spending is one step in taking control of your finances. After you know where your money is going, you can then identify patterns in your spending habits. Then you can make adjustments to your budget categories, as needed. Make a commitment to yourself to track your spending for just one week to see how much you can learn. You might be surprised!


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