Tips to Track Your Spending

Why should anyone track their spending? The answer is simple. We all keep an eye on our calorie levels and the type of food we eat to be in good health. Why should our financial health be any different? If you do not keep track of your spending, your chance of over-spending goes way up. You may not realize that those small cents add up to big dollars over the course of time.

Saving is always a good idea, and it's even more important during the current economic slowdown. You need not necessarily earn more to save more. You could also cut down on your spending to save more. The best way to do that is to create a log and make an entry for every penny you spend. You will be amazed at the end of the year when you add up those so-called penny amounts you spent and see them run into hundreds or thousands of dollars.

How do I keep track of my spending? Do I need to buy a financial planning tool?

Tracking your spending is very easy and you do not need buy any financial tools. All you will need is a diary or a simple notebook to log your spending entries. Create as many columns needed on a page and write the date at the top of each page. A typical log could have column names like:

- Monthly Rent

- Credit Card Payments

- Entertainment

- Groceries

- Gas

- Medical Expenses

Next, you'll want to keep track of your typical expenses for one month or so, to find out where your money is going. As you spend, log all your purchases with the amount spent on each. For example if you go to the movies and spend $30 for tickets and snacks, log that under entertainment. If you go to the movies more often in a week then you are spending a lot more on entertainment than you might need to. Instead, you could choose the Pay per View option, enjoy some homemade snacks and watch a movie at home. Small things like this can add up to a lot.

You would be surprised at the amount of money you spend when you buy food and drinks away from home, when you could have saved lots by making them yourself. Watching a movie at home, or planning your grocery purchases by limiting the visit to the supermarket to once a week are a few examples that could save you huge amounts money.

By tracking your spending you will be able to find out the areas where you spend more than you need. Once you identify that, set a budget for it and make sure you live within that budget. The extra amount that you were actually spending can go into your savings. Keeping track of your spending will lead you on the right track to be in a healthy financial state.