Collect Expense Data
When preparing to review the past three- to six-months of spending, it’s important to collect bank statements if you tend to pay with a credit or debit card on most purchases. If you mostly pay with cash or checks, you’ll need to gather receipts and bills. Don’t forget to collect periodic bills and expenses that are paid annually, quarterly, or bimonthly, such as tuition, taxes, or insurance.
Classify Your Expenses
After you’ve gathered your expenses, you can group them any number of ways. No matter how you do it, the grouping should make sense to you and be very simple to maintain. Use broad categories to more easily track expenses and provide insight into your spending habits and patterns. For example, a category like “home” could include rent, utilities, insurance, and your phone bill. You also want to make sure each category matches your lifestyle. For example, if you tend to eat out often, restaurant expenses and groceries could be lumped together in a “food” category. But if dining out is more of a treat for you, you may consider placing those expenses in the “entertainment” group. Common categories might include:
Home expensesCredit card or loan paymentsEating outGroceriesTransportationHealth careKids and/or petsGifts or donationsStreaming services and subscriptionsEntertainment
Expenses can be classified as fixed or variable expenses. For example, your rent or mortgage payment doesn’t change each month, so it’s fixed. A variable expense, like buying groceries or going to the movies, is more likely to change from week to week or month to month. When looking over your spending, be sure to compare one month to another, rather than just analyze one month’s expenses, as your variable expenses will often differ more frequently.
Next Steps and More Resources
The categories you’ve created and amounts you’ve totaled will help inform your next step: creating a spending plan. This will help narrow your focus and reframe your spending to meet your goals. Learn more about tools for tracking spending and budgeting from The Balance:
Most budgeting apps help you track your spending, including our entries for the Best Budgeting Apps. The Best Personal Finance Software also helps you track spending easily, right from the comfort of your PC. You’ll find expense tracking solutions in our collection of The Best Free Budgeting Spreadsheets, too.
