Hard earned but easily spent, it is a difficult task to diligently track what happens to your money after pay day. In order to ensure your ability to cover basic expenses, save a little for the future, and have some fun in the present, it is important to keep track of personal finances.

 

1. Before you create a budget, take some time to think about your financial goals. Whether it is being able to afford a new apartment, paying off debt, or if you have a certain number you want to see in your savings account, make sure you have a clearly defined goal and timeline for achieving it.

 

A man in a suit fans money at the camera

Putting together a plan is the best way to achieve your savings goals.

2. The best way to start budget tracking is to continue as normal. Keep up your typical spending habits for a few weeks and keep a detailed record of all the cash generated and spent. Do not let anything slip through the cracks. It is important that you continue with your normal habits and routine during this time in order get an accurate representation of your cash flow. Creating a spreadsheet to check against your receipts, bank statements, and credit card statements will help you get yourself set up for step three.

 

3. Then, categorize everything. Use the spreadsheet you have already created, which shows all your income streams versus all of your expenses. Calculate your net income on a weekly and monthly basis. Break down your expenses into all of their base components. Make sure you include: rent/mortgage payments, utilities, groceries, transportation, money spent on fun/leisure activities, and whatever expenses you accrue. Calculate your weekly and monthly averages for income and each category of expense.

 

Now you can see how much money you save, how much money you spend, and what you spend it on. Compare your balance sheet to your financial goal, and determine whether you will reach the goal within your timeline. If the answer is no, you can see exactly where the extraneous spending is and create a budget to help control expenses. Your budget will help you achieve your goal in a timely manner as long, as you are willing to stick to it.

 

How do you keep track of your personal finances? What methods do you find most helpful? Leave a comment or find me on Twitter @Andrew_Morse4