Most of us start to feel the crunch as the end of the month approaches and then realize that we are in dire need of a budget tracker. While everyone gives money advice, it is difficult to approach savings and investment without first having a complete outlook of all your spending. Tracking expenses involves identifying your total expenditures every month and keeping a record of them.
Importance Of An Expense Tracker
A daily expense tracker can help you in multiple ways to understand your financial position and help in optimizing your budget better. Here are a few ways it helps.
1. Help Understand Spending Habits
By keeping an expense tracker, you can identify all your expenditures in a month and become aware of any negative spending behaviours. You can also account for any unused services or excess spend in certain areas and figure out methods of reducing them. For example, an unused gym membership or multiple streaming services can be an area where spending can be reduced. You can also assess the percentage of income that goes towards various segments and understand areas where improvements can be made.
2. Meet Financial Goals
It’s not enough to be aware of your spending but each one has specific financial goals they want to achieve whether it’s building a nest egg, saving up for a vacation, or splurging on luxury items. All of these short-term or long-term goals require financial planning and setting objectives. By analyzing your spending and savings rate, you can figure out how much money in actual terms will be needed to contribute towards your goals. Using a daily expenses app can help you prioritize savings or even pay off outstanding debt.
3. Budget Planning
If you are someone who plans a budget but isn’t able to stick to the plan it could be because you do not know how to keep track of expenses. If you don’t track your money, you won’t know when to stop spending in a given category like food or clothing, for example. Recognizing that you are overspending or underspending consistently in one spending category in your budget can help you determine whether you need to make cuts or increases in that category for the next month’s budget.
Ways To Track Expenses
Once you have decided to track your spending, you need to know how to track expenses. There are a few approaches available that can streamline the process but the best approach is the one you can consistently use without quitting.
1. Maintain A Record Book
A simple, tech-free solution is writing down all your spending in a notebook. Either mark a page for each spending category or write all your expenses and mention the expenditure category along with it; on a single page. This will let you know all your expenses at a glance, though it lacks the sophisticated tools provided by software tools that help in a more detailed analysis.
2. Use Excel Sheets
Alternatively, you can use excel sheets or Google sheets to keep track of your spending in one place. This is slightly easier as you can enter data directly from a bank statement and make set views that can be easily replicated for every month. Also, you can perform trend analysis and create charts to understand spending patterns and better allocate in the next month’s budget. The only downside is that all the data has to be entered manually and the analysis has to be done using functions.
3. Mobile Apps
Nowadays, a more convenient and modern way is to use an expense tracker app. They offer colourful graphs and charts that neatly categorise all your spending categories. It allows easy entry of details and automates multiple processes making it easier to operate and quickly analyze the data.
5 Apps To Help You Track Expenses
Before you begin to understand how to cut costs, you need a snapshot of all your expenses. Using one of the mobile apps mentioned below will make this faster and convenient.
Walnut is a top-rated expense tracker app available today. It helps to automatically and securely track your monthly expenses. This app helps to find out how much you spend on food, shopping, groceries and how much you are saving a month. This way, at the end of the month, you’ll know your major source of expense. It also checks and integrates with wallets, bank accounts, and credit cards for up-to-date information.
2. Money Manager
Money Manager using bright colours makes tracking spending interesting and is a perfect solution for beginners. You can choose to enter data manually if you prefer privacy or sync with various third-party companies options provided by the app. It has both a free version and a paid one and is available on both Android and iOS. Its main advantages are that it’s simple to use, and gives an overall view of all income and spending, with multiple sub-categories of expenses.
Wallet is a daily expenses app that gives you quick and easy insights and includes both free and paid features. It allows you to bring all your different accounts into one place, automate tracking your spends by connecting your bank account including HDFC, SBI, ICICI, and Axis, as well as accounts like Amazon Pay, and some additional features like sharing your details and more visual customisation options. It records your income and expenses, and further lets you allot money for your goals, keep a track of your debts.. You can also set a budget for shopping lists so that you don’t go overboard and give you a detailed analytical understanding of your spending habits.
4. You Need A Budget (YNAB)
YNAB is a popular tracking app available both for mobile and desktop. This app is for the serious budgeting aficionados out there. YNAB has a budget section that helps us to plan your spending ahead of time, thus reducing the chance of overspending. One major downside of this app is that all transactions have to be entered manually in case of accounts outside of either the US or Canada. It is a paid app with a 34-day free trial version and is recommended for someone who wants detailed analysis and budget tracking options.
Monefy provides a very easy experience due to its simple interface and navigation features. With 15 categories of expenses, 3 income options, and colourful pie chart options tracking your money with this app becomes a piece of cake. It has both free and premium versions available and also provides different time frames from daily to yearly to gain a deep understanding of your spending patterns.
How To Optimize Monthly Expenses?
Once you have begun to enter all your expense data, you can figure out methods of improving and handling your expenses better through these tips.
1. Put Extra Income Into Savings
Keep a change jar at home where any change collected is collected and at the end of the month deposit the amount in the bank. Similarly, any extra income from bonuses or gifts from family and relatives should be put into a separate savings account and become an emergency fund when required.
2. Make A Shopping List Before Going
If you are looking at how to cut household expenses one of the major areas of concern is groceries and food. Always have a list of all the items required and never go grocery shopping hungry as it makes you tempted to buy more food. Pre-plan what you will need for the week before going to the store to not only make sure you don’t forget anything but also to avoid picking up extra items you don’t need. Also, this will help you eat more at home and plan your activities better.
3. Cancel Unused Memberships
It can be easy to forget about our automatically recurring monthly bills. If you have a gym membership that you’ve always had but never use it may be time to cancel it. Similarly, many of us are moving to streaming services like Netflix and Hotstar and not watching cable TV. You can choose to either cancel your subscription or change your plan better suited for your needs. Eliminating the extra expenses you rarely use could make a significant difference in your budget.
4. Set A Spending Limit
Make it a habit to avoid buying things on impulse. If you find yourself wanting an expensive item like a coat you stumbled upon at the mall, wait a day or two and see if you’re still thinking about it. If you still feel the urge, then go ahead and purchase it. You can also look for either cheap options or try checking for a discount available online.
5. Use Discount Codes/Coupons
While how to cut down expenses often focuses on eliminating purchases, there are still some things you have to buy. When you do make purchases, always try to use coupons and look for discount codes. You can also use discount websites or sign up for apps like Cred or use a credit card with multiple rewards for more benefits.
Choose an expense tracker based on the ease of use, the authenticity of the app, and the ability to sync data across platforms and various third-party apps. It’s always a good time to start budgeting and cut down on unwanted expenses. Using an app that can ease this process will help you in achieving your financial goals quicker.