4 Steps to Track Your Spending and Build Better Habits
21st January 2021
So you’ve decided that your personal finances need a little love and attention. That means it’s time to start tracking your expenses, but where do you start? Managing your money isn’t as difficult as it may seem, you just need to start paying attention to your spending patterns. Building a successful budget is all about looking into your past spending behaviour - the good and the bad - in detail to identify changes.
Keeping a money diary, a spreadsheet or using a budget app to look back on your spending history is great, but using it to plan ahead is even better. We all tend to lose control without budget tracking, thinking of each expense in isolation. It might be one more round on a night out, the cost of a taxi after you miss your bus or a takeaway when you didn’t have time to cook. Soon, £25 has become £75 and you can’t figure out why. That’s where tracking steps in, both to anticipate and reflect on your spending decisions.
This post is all about helping you to track your spending. Don’t worry, we’re definitely not here to make it complicated.
Step 1: Goals
Set your goals
Getting started, you need a clear vision of what you’re trying to achieve and set goals for the best chance of success. Maybe that’s to take control of where your money goes and get your finances into shape, avoiding unnecessary spending, or maybe you know you’re leaking money somewhere and want to know why.
Set your why
You may want to create a daily budget to help build your savings or get you out of debt. These are probably the two most motivating reasons you can have, especially if you’re saving for something exciting like a wedding or a new baby, or working towards that day that you’re debt-free. It’s easier to visualise what you want and commit to tracking, but it will also put each purchase into perspective. Do you really need that £30 taxi if it delays your goals further out of your grasp? It’s OK to let your goals lead you down a path of better decisions.
Step 2: Make quick and simple changes
Start regularly reviewing bank statements
Even if you’re great at tracking and budgeting, sometimes unexpected or unknown expenses fall through the cracks, which is why it’s always important to check your own records against your bank statements. Look out for surprises, mistakes or errors (although these are relatively uncommon). A common offender is those subscriptions you thought you’d cancelled but still show up.
Stick to one bank card
Today it’s normal for people to have multiple cards for whatever reasons, especially with certain credit cards offering incentives for you to apply. It’s easy for your outgoings to be spread across several different accounts, making it more difficult than ever to track your spending overall. Avoid this by only using one card for the entire month. This way, your bank statement is a full representation of your spending. Also, stop using cash. If you get paid in cash, it’s worth paying this into your account regularly to collect it all in the same place.
Use simple tracking tools
The easiest way to keep track of your finances is to get it all written down, whether that be in a notebook or your phone’s notes. There are also tons of budgeting apps available with their recent surge in popularity. Smarter than ever, some use AI, most connect to all your bank accounts securely and they save you having to use a spreadsheet. Certain bank apps, like Monzo, notify you every time you make a purchase, meaning you’re much more conscious about how much is coming out of your account. Using these digital tools consistently will help you stay in control of your monthly budget and even identify areas where you’re overspending.
Popular apps include Mint, which shows your spending habits all in one place.
Step 3: Create a habit
Make tracking your new habit
Tracking your finances is a habit like any other, so don’t leave it to chance or it won’t get done. The biggest hurdle for doing it regularly isn’t the medium you use, whether that’s an app or good old fashioned pen and paper - these are just tools. Instead, it’s all about turning it into a new habit, rather than a chore like having to remember to use a particular card each time or check your tracking at regular intervals.
The common myth says it takes 21 days to form a habit, which is perfect for this as it’ll be most effective to track expenses for the next 30 days. You might have to silence your brain’s protests, but after those 30 days it should become second nature.
To make it easier, try setting multiple alarms on your phone to remind you to record how much you’ve spent so far. Alternatively for more visual reminders, grab a post-it note reminder and put it somewhere you can’t miss like the fridge or the bathroom cabinet.
Make tracking your new habit
Tracking your finances is a habit like any other, so don’t leave it to chance or it won’t get done. The biggest hurdle for doing it regularly isn’t the medium you use, whether that’s an app or good old fashioned pen and paper - these are just tools. Instead, it’s all about turning it into a new habit, rather than a chore like having to remember to use a particular card each time or check your tracking at regular intervals.
The common myth says it takes 21 days to form a habit, which is perfect for this as it’ll be most effective to track expenses for the next 30 days. You might have to silence your brain’s protests, but after those 30 days it should become second nature.
To make it easier, try setting multiple alarms on your phone to remind you to record how much you’ve spent so far. Alternatively for more visual reminders, grab a post-it note reminder and put it somewhere you can’t miss like the fridge or the bathroom cabinet.
Visualize your progress
One idea is to print off a progress checker with individual tabs for each day - the more colours the better. Check off each day you manage to track your finances and see how long you can keep a streak going. It won’t be long before the chain will become too painful to break and you now have the ultimate motivator - your own competitiveness. Habit trackers are tried and tested to help you overcome the initial resistance and soon you’ll be doing it without a second thought.
Be reasonable. Don’t try having a two week period of no spending, it’s an extreme that will likely set you up for failure before you even start. Instead, add in a couple of no-spend days which is far more manageable. You could also start getting creative with how you reduce costs. For example, you could switch lattes out for normal coffees, carpool with colleagues, or use the app Waze to find the cheapest petrol in your area.
Step 4: Dive deeper
Categorise your spending
For a true look into your finances, it’s important to understand which areas of your life are the most expensive including essential monthly expenses. Dividing them up can help with this. Many apps can do this for you in user friendly ways, though it does need input from you to know what categories each purchase belongs in. Try playing this game first: guess how much you spend on each of your categories and see how it matches up in reality for a real eye-opener. Categories can include:
- Essentials (groceries, rent/mortgage)
- Bills
- Essential travel (petrol, train tickets, bus passes)
- Self-care (haircuts, gym memberships)
- Subscriptions and magazines (apps, streaming services)
- Eating/drinking out (takeaways, coffees, restaurants, bars, taxis home)
- Spending money (shopping, beauty treatments, gadgets, gifts)
It’s not just about what you’re spending on, but why. If you buy lunch at work each day to get out of the office, why not go for a walk or a coffee in a cafe instead? There’s almost always an alternative if you figure out the why behind your spending.
Conclusion
Staying on top of your finances and saving money isn’t always going to be easy, but don’t beat yourself up if things don’t go to plan or you have an off day (or week). It’s a big deal to change old behaviours, habits and choices. Just pick yourself back up again and restart your streak - see if you can beat it this time.
Don’t give up. Remember, just 30 days of daily tracking really can be life changing. You’ll be surprised just how just how many alternatives you can find to your usual spending.