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Financial Security Step 1 - Track your Expenses

Financial Security Step 1: Track Your Expenses

Track your expenses to show where your money has been going and where you need it to go to meet your goals.

If you’re new to the Financial Security Steps, start here: Welcome!

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Anyone can get their finances under control, with enough time, effort and direction. It’s not easy to know how to begin though. I recommend starting in the past and track your expenses. Find a method that works for you, categorize transactions for the last 3 months, and look at the category totals. This is where you’re starting, what you need to change. Be intentional in your spending from this day forward. Commit yourself now.

How to track your expenses

There are many, many ways to track your expenses (and eventually create a budget). You can use a website with an associated app, an Excel spreadsheet, or pen and paper. Many financial bloggers provide a download to help with either expense tracking or budgeting. I’m not re-inventing the wheel, but you can use this download to help decide how much detail you want to track.

Mint

Mint is a great software to track expenses. The app works seamlessly with the website, and you can import bank accounts, debts, and investment accounts. You can also budget and get bill reminders. The best part of Mint is that it’s free, including syncing to your online accounts. I don’t love the budgeting setup, so I no longer use Mint personally.

You Need a Budget (YNAB)

YNAB is a zero-based budgeting software, which means that every dollar is “given a job.” You budget all of your income, rather than saving or spending whatever is left over after the bills are paid. The website also has a lot of education opportunities. I’ve tried YNAB & found it too complex for me – I need something easy & quick, since I usually track expenses while supervising kids.

You can get a free trial for YNAB, but then you have to pay either monthly or annually.

EveryDollar

EveryDollar is Dave Ramsey’s zero-based budgeting app. The concept is the same as YNAB, but it was easier for me to understand. I like the app and website both, plus they tie to another product called Baby Steps, which I am using to track our debt payoff. This would help you throughout the Ramsey Baby Step program.

The basic version is free, but you have to pay if you want your transactions to automatically import (I believe). If you work for a larger corporation, check if they offer the employee benefit of a Ramsey+ subscription. This gives you access to the paid version of EveryDollar and all the Financial Peace education available.

A spreadsheet or printable

An article on The Balance lists many spreadsheet options for expense tracking. If this is the route you want to take, look through them and see what works best for you, or what makes sense to you.

Ashley at Budgets Made Easy offers a hardcore spreadsheet, as well as a budget planner. If you do a google search, you’ll tons of options. Choose whatever works best for you.

I use EveryDollar because I want to make budgeting and expense tracking as easy as possible, so I will stay current on it. If I wait a month or two to track expenses, we get off track… or I get lazy about tracking and skip it. Neither of those scenarios help our financial situation. I like that EveryDollar imports transactions for me, so I don’t to enter everything myself.

Financial Security Step 1 - Track your Expenses | Balanced FI

Decide what to track

Answer these questions when deciding the level of detail you want to track. All of the apps I mentioned have pre-determined categories, but you need to decide how detailed you want to be.

  1. Utilities or water/electricity/trash/etc?
  2. What does “groceries” include? Just food? Household and personal care items? Diapers? Pet food?
  3. Are all medical expenses tracked together? By person? Pharmacy/doctor visits/dental?
  4. Are there certain things you want to track? For example, we budget my husband’s bowling league fees as a separate line item because the league doesn’t run for the entire year. It helps us budget more accurately.

It’s going to be hard to get really detailed looking back at past transactions, so it’s OK to lump Walmart & Costco into “groceries” for now. When you’re tracking in real time, you may choose to split your shampoo into a different category, but for now, just get this step done.

Looking back helps you move forward

I want you to start by tracking OLD transactions, rather than tracking new purchases as you go. People tend to change their behaviors when they’re paying attention, which would give you an inaccurate picture of your spending. You want to see what you’re really spending money on, not what you think you should be spending money on.

It’s also very motivating to see how far you’ve come. One day, you’ll look back at this exercise and be amazed at how your spending habits have changed. I think you’ll spend less on eating out, less on debt payments, and more on the things that really matter to you. You will have a large emergency fund, retirement savings, and a sense of peace.

This step should only take you a few hours, so try to get it done soon. Carve out some time after the kids are in bed or on the weekend, then move on to step 2.

You’re going to use this information to create a budget in step 6. Tracking can also help you identify annual or monthly expenses, which will be useful for step 3. Finally, this step gives you a starting place for laying out your debts (based on the payments you’re making now) for step 4.

Continue to track expenses

Make tracking your expenses part of your daily or weekly routine. I like to track expenses every day during lunch. I’m sitting down and have access to my phone, so it’s easy to track the few transactions that have posted to my accounts since the day before. If you stay on top of tracking, it will literally take minutes a day, and provide you with invaluable information.

Even after you know how much to pay on your debts or have made a budget, you NEED to continue to track expenses to make sure you’re following your plan. You can change your purchasing behavior if you have spent 75% of your grocery budget by the 15th of the month.

The Financial Security Steps build upon one another, and you’ve just taken the first step!

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