Before anyone can set out into the world of investing it is very important to get your financial house in order. This will look different for different people because some may be in debt while others are not. Regardless of the situation, I am sure that we can all agree that one of the most important steps to getting your financial house in order is to begin tracking your expenses.
For me this whole adventure really began back in 2014. I decided that I wanted to get my financial house in order and I wanted to become an investor. So after doing a lot of research, I knew that first I would need to start tracking my expenses.
I had learned that there were a lot of different ways that you can track your expenses but I decided to start out by using the most basic old school method that I could think of.
Tracking Expenses By Hand
For anyone else who is old enough to remember before computers took over, this will look very similar to keeping a check book.
Basically, it is comprised of the account you are looking at which will show a starting balance and then you will either add or subtract money depending on if it is an income or an expense.
Again, everyone’s situation will look different but the accounts that I choose to track were: checkings, savings and credit cards. If you have been following my blog then you may remember my article titled “Let Your Rewards Truly Reward You“. In this article, I spoke about how I was transitioning over to paying for everything with credit cards so that I could get the cash back rewards. It wasn’t until years later that I began to Maximize My Credit Card Cash Back Rewards. So needless to say, most of the tracking would be happening for my credit card accounts more than the others.
Rather than build everything by hand, I built out a form using Microsoft Excel that would allow me to track these expenses.
So now that I had a form built, I printed out copies for all of the different accounts and put them in a three ring binder. This is where the fun part really began. Now it was on me to start collecting receipts after every transaction and to list them on my expense tracker.
It did take some getting use to but I did build the habit of asking for a receipt after every transaction. I would collect the receipts for a couple of days and then I would sit down and list them on the tracker.
I tracked my expenses like this for a couple of years. Somewhere around a year or two into tracking my expenses I decided that I needed someway to be able to check on my progress. So I used a tried and true method of reporting on my self each month.
At the beginning of each month, I would sit down and prepare my Monthly Updates article here for More Dividends but I would also calculate my net worth.
My net worth was a great report card every month because it calculates the difference in my assets and liabilities. So if my net worth is going up then I am doing a good job. If my net worth is going down then I have areas that I need to work on.
For years, I followed this system of tracking my expenses. Then in 2018 or 2019, I decided to take my expense tracking all digital.
Tracking Expenses With A Spreadsheet
At this point, my financial house was really getting a solid foundation built. I found that it would be advantageous to be able to see my expenses while I was out and about and on the go. The best plan for me to be able to achieve this was to start tracking my expenses using spreadsheets.
I could have just used Microsoft Excel to accomplish my goal but I wanted to be able to check my expenses on the go and at that time I didn’t pay for the software with a subscription. So I decided that I would move the spreadsheets from Microsoft Excel to Google Sheets. It is a very comparable program but all of the files can be stored in the cloud and then when I put the Google Sheets app on my phone, it allowed me to be able to check my expenses on my phone wherever I was.
Moving my expense tracker to spreadsheets was a big step but I wanted to take it one step farther. I wanted to start analyzing on what categories and places that I was spending the most money. So I built in a drop down menu that would allow me to select categories for each purchase.
So now, along with having a monthly report card of my net worth, I also had a fully functional spreadsheet that would track expenses and then categorizes them and display the information in graphs and charts. This made it very easy to know where my money was going and it really helped me to shore up my financial house that much more.
I continued to use this system for a couple of years. I honestly had 0 complaints out of the spreadsheets themselves. The problem that I encountered had nothing to do with them at all.
Tracking Expenses Using Automation
Earlier this year I had begun travelling a lot. Because of Covid it was all travel in near by states. Regardless, this prevented me from having a lot of extra time. Not to mention that I was on the road and keeping up with expenses and receipts was that much harder.
Now that I was faced with some new problems, I would have to come up with some new solutions.
Over the years, I had heard of several platforms that could be used for tracking expenses. I looked into several of them but the one that I ended up going with was Mint. I decided on them in large part because I am already a customer of their TurboTax software and I have been a customer of their Quicken software before.
So I downloaded the Mint app and began to link my accounts. It went very smoothly. One thing I will note is that I do have accounts that are not supported on the app. Which isn’t a big deal to me since I am using it for expense tracking but it does through off the net worth calculation.
Once all of my accounts were linked then I was set. I have been using the app for almost a year now and I love it. It keeps an accurate ledger of my expenses plus it helps save me time because I am no longer saving receipts and then having to sit down to track them all.
Tracking Expenses In The Future
Since I have been enjoying the Mint app, I see no reason to change it for the foreseeable future. I will continue to use the app.
Even though I am currently using the app. I think that it was very important that I began this journey by tracking my expenses by hand. In doing it that way, it allowed me to stay more in touch with how I was spending my money. I think that it was a key factor in my evolution thus far.
I will continue to use the Mint app but I will definitely continue to look for ways that I can evolve my expense tracking system.
Do you have any special tricks or systems that you use to track your expenses. If so, I would love to hear more about them down in the comments down below.
As always I look forward to reading all of your comments and questions, until then….. happy investing!
-Jason from MoreDividends.com