How to Start Tracking Your Spending

The first piece of financial advice most people give is to create a budget, but you need to know how to start tracking your spending beforehand.If you’re trying to set goals to improve your finances, one of the first things people often advise is to set a budget.

That seems like solid advice on the surface, but sometimes budgets don’t work for a variety of reasons.

One of the most common reasons why creating a budget doesn’t always work is because it’s actually not the first step you should take when trying to get your finances in order.

I recently started providing a new 3-month financial coaching service to help people learn how to manage their money properly.

My goal is to target people who are at the beginning stages of getting their finances back on track and want help with paying off debt, creating a budget, saving more, etc.

When I began working with my first client, we didn’t even talk about her budget until the second month. Instead, the first thing I told her was to track her spending for 30 days.

Why It’s Important to Track Your Spending First

When it comes to your financial journey, everyone has to start somewhere. Creating a budget is a great idea to help you manage your spending, but you don’t want to limit yourself too much or attempt to follow a budget that’s unrealistic.

When you start by tracking your spending, you can get the full picture and understand how much money you’re spending on certain expenses as well as hidden expenses that may be eating up your disposable income.

When I worked with my financial coaching clients, I found that one woman didn’t realize how much she and her boyfriend were spending on cable or dining out. Another person realized they were spending unnecessarily on bank fees each month and needed to adjust their grocery spending.

Tracking your spending is just like putting a mirror in front of your financial habits. Each day you spend money, you might not make a mental note of your habits and how things are adding up.

Ready to start tracking your money? Here are a few ways to do it.

Before you set a budget, you should start tracking your spending - here's how Click To Tweet

Pen and Paper (Or a Spreadsheet)

If you want to track your spending the good old fashioned way, you can write everything out and hold onto your receipts or enter information into a spreadsheet on your computer.

Start by jotting down all your fixed expenses and bills like your rent or mortgage, insurance, phone bill, internet service, etc. You know all those expenses need to be paid each month and they’re always the same amount.

Then, keep track of your variable expenses by holding onto receipts and reviewing your bank statements online if you don’t spend cash. Start to update the categories for variable expenses as you go like gas, clothing, groceries, etc.

I actually use Google Sheets to track my spending each month, but the tricky part is that you need to record everything. If you make a random trip to Walgreens one day and spend $6 on picture frames or withdraw $20 from an ATM, you need to save your receipt and record it.

You may want to leave a pen and notepad in your car, purse, or bag so you can update it while you’re on the go so you don’t forget to do it when you get home.

This can sound tedious, but the key is to acknowledge where every penny is going each month so you’ll know where you need to make improvements.

Download an App

If you’re not a fan of tracking your spending manually, you can receive a little assistance by downloading a budgeting app. There are many different budgeting apps available for free so you can track your spending right from your phone, but one of the most popular ones is

Mint is actually a website that has an app version as well so you can log in whether you’re at home or away from the computer.

Mint is a secure platform and will connect all your accounts so you can see what you spent on your credit and debit cards, along with how much you owe lenders and what’s in your savings account.

Mint has a ton of helpful tools, but one of the best features is the fact that it helps categorize all your spending to determine which areas you are spending the most in.

For example, you might have known you’ve been dining out a little bit too much over the past month, but when you connect all your accounts to Mint, you’ll see how much you spent at restaurants for the entire month.

Mint isn’t completely hands-off. The one thing I don’t like that much is that sometimes Mint categorizes expenses incorrectly.

One day, I paid for an online course and Mint categorized the purchase as clothing. Another time, I made a purchase at a 7 Eleven store and Mint categorized it as gas/fuel.

If you’re going to use Mint to track your spending, you should definitely log in at least once a week to make sure all your purchases are being categorized correctly and fix anything that isn’t. You may have to create new categories if they don’t match the basic ones.

Download Software

If you want to take it a step further, you can download specific budgeting software to track your spending more closely.

YNAB, which stands for You Need a Budget, is a popular subscription-based budgeting software that helps you track your spending and so much more.

YNAB provides bank syncing to connect all your accounts just like Mint. However, many people use the software to help them reach goals like paying off debt, escaping the paycheck to paycheck cycle, find ‘missing money’ that they might have skipped over before tracking their spending, and so much more.

On YNAB’s website, they state the software helps people save an average of $200 during their first month and around $3,300 all together.

If you’re interested in tracking your spending as a start, then focusing on creating a solid budget and going after goals like paying off debt, you might find YNAB worth the investment.

When it comes to getting on the right financial path, tracking your expenses is just the beginning, but it’s a very crucial step that can be eye-opening and help set you on the road to success.

Have you tracked your expenses before? Which method do you like best?