Tracking Your Spending

(How to start) TRACKING YOUR SPENDING

I never used to follow a budget. I didn't quite know what I was doing on this financial journey yet, but I knew I was starting somewhere. So what I did was started with tracking my spending. In hindsight, I realize this is a CRUCIAL step that is 100% absolutely needed before you dive into creating a forward looking spending plan.

Why? Because if you create a spending plan without a true understanding of where your spending habits are, you are likely just guessing about what you need in each category (food, shopping, health, etc.) A lot of time what we think we spend differs from reality, and when we don't take the time to look back and just guess.. we are not setting ourselves up for success.

You NEED to track your spending in order to have a more clear and accurate view of your actual spending habits in order to build a budget that fits you and represents your situation well.

Before you get started with the actual tracking practice, you can download my spending tracking template for free, here. 

SIDE NOTE- In this day and age, there are countless apps out there that you can perform this same task with- such as Mint or EveryDollar. I initially started doing this more manually, because it takes very little time and I like to dig in and have my hands on the details. It's totally personal preference! Find which method works for you and run with it. 

Here are the steps to follow each month in order to successfully track your spending and become more aware and mindful of your spending habits.

1. Identify all forms of payment you use to spend

» This may be a credit card(s), debit card, cash, venmo, etc.. we need to identify all forms so that we can gather the entirety of our spending.

2. Download your spending transactions monthly

» Log in online to your bank accounts to gather the statement of spending for the prior month (or months, often I recommend you track your spending for the last 2 to 3 months and average things out so that you can have a better representation).

In your online bank you should see a feature in which you are able to download your account history / transactions to an excel sheet. I download and sort the transactions to only include the month(s) I am looking at- delete everything else.

3. Sort transactions to 'buckets'

» Once you've downloaded all your account(s) transactions for the month(s) you are tracking, you will start sorting. COLOR CODING is my go to. I start making my way down my sheet and color coding things that I identify as my 'buckets'. For example I scan and find all grocery purchases for the month and highlight them pink. I then find all grocery gas lines and highlight them orange. So on and so forth until you've got every transaction highlighted.

4. Total buckets & transfer to spending tracking sheet

» Next step is to total each color coded group and record that total on my spending tracking sheet. For example, all pink line items for grocery are summed up and that total is recorded in my 'Grocery' total in my spending tracking sheet. If you are doing the spending tracking for the first time and are looking back at more than 1 month you will need to average out your total by the number of months you are tracking.

5. Compare your spending to your values

This practice is not an effort of evoking shame and guilt about your spending habits. I understand those feelings and emotions can arise as we look at our spending habits directly in the eye. But instead, this practice is to become hyper-aware of where we are today. Once you have your tracking complete, I suggest you reflect on the information. Are you surprised by anything? Do you feel that your spending is in alignment with your values? If so, great.. let's create room to continue to spend in these areas as we move forward with a spending plan. If your spending is not aligned with your goals, we can now recognize this and make a conscious effort to reprioritize as we create a spending plan.

A couple of notes upon completion:

If you're ready to take it to the next step, identify what your income was in the prior month(s). Does your spending exceed your income? If not, great.. let's see how we can allocate those extra dollars to debt payoff, savings or investing! If you are spending more than you made.. we need to seriously readjust because odds are that money may be sitting on a credit card that has a very high interest rated.

Remember there are always two ways to tackling this - spend less or better yet, increase our income.

After tracking your spending I hope that you are able to have a clearer picture of where your current spending habits are. If you so choose, I would encourage you to repeat this process monthly to keep aware of where your money is going. Better yet, when you are ready use this information to pivot into a proactive approach of creating a spending plan.

Personally, this spending tracking has evolved into budgeting. I no longer download my statement and sort, but instead track my spending through my monthly budget, in real time. This transition is seamless, but HAS to start with the tracking (if you're interested in learning more, reach out to me!)

-Malia 

Thank you to The Crazy Many in the Pink Wig & the book Your Money or Your Life for introducing me and teaching me about the practice and habit of tracking your spending