Personal Finance Guide

How to Track Your Income and Expenses [With FREE Template]

We all want to know how to manage our money well. Yet, the first hurdle people face on their financial journey is the very act of getting started. 

Confronting your financial reality for the first time can feel intimidating but just like pulling off a band-aid, the quicker you do it, the less pain you’ll feel in the future. If you don’t know how to start, I suggest starting small and living by these 3 words:

Track your spending.

That’s it. You don’t need to do anything else besides tracking your spending when you first embark on your financial journey. Once you’ve developed the habit of expense tracking, the rest will fall in place later.  

Here’s how you can start tracking your expenses. 

Record every single expense

And I mean. Every. Single. Expense. Get into the habit of recording down all the expenses you make in a day on food, rent, transportation, clothing, hobbies, entertainment and so on. If you want to get serious about your money, you need to know what you’re spending your money on. 

You can use an expense tracking app and add your expenses as you spend money throughout the day. Or, you can set a reminder on your phone to record your expenses into an Excel sheet at the end of your day. If you’re old school, you can jot your expenses down in a Buku 555. Personally, I use an expense tracker app on my phone since 2013.

tracking daily expenses
This app hasn’t been updated since 2013

At first, you might keep forgetting to record your spending, especially if you’ve never done it before. If it’s a recurring problem, find creative ways to help you stay on track. You can rope in your best friend or your partner and turn expense tracking into a group effort. This way, you have someone to help you stay accountable. And both you and your partner/best friend are upping your personal finance game together. Win-win for everyone involved. 

Whatever method you choose, make sure it’s easy and convenient for you to record your expenses. The fewer obstacles you put between you and the habit (expense tracking) you’re trying to form, the easier it is to form that habit. 

Review your expenses every month

Take about 30 minutes each month to review your expenses. Monthly reviews are where you’ll learn more about yourself and your spending patterns. Some expense tracking apps already compile your expenses in fancy graphs and charts for you, so it won’t take you long to review your spending.

In my case, I transfer my expenses in each category to a Google Sheet at the end of every month. 

tracking monthly expenses
Tracking monthly expenses

If you want to use my Google Sheet as a template for your monthly expense tracking, you can subscribe below to get it for free.

By reviewing your monthly expenses, you’ll have a much clearer picture of how much you’re spending, on average, every month in each category. For instance, based on my monthly review, I know I average between S$400 to S$500 on food alone. 

Eventually, identifying how much you regularly spend in each expense category will serve as a baseline from which you can start planning a budget (see what I meant by everything falling in place later?). 

Track your income every month

If you have multiple sources of income or if your income varies every month, you should also track your income. When I was freelancing there were times when I was spending from my savings while waiting for clients to settle their payments with me. If I didn’t record all my income, I would have no idea if I’m spending more money than I’m earning. 

Even if you have only 1 source of income right now, it’s still great to record it to gauge how much you’re spending out of your income.

tracking monthly income
Tracking monthly income

In the Google Sheet template, I’ve created a tab to track income from different sources and how much you’re saving, investing and putting aside from your income every month.

Why start your personal finance journey by tracking your expenses and income?

Knowing where your money is going each month, above all else, is THE ESSENTIAL starting point for managing your money better. 

Think about it, how many times have you found yourself staring at the numbers in your bank account at the end of the month and wondering where it all went? 

1) Be present during transactions

One side-effect that comes with diligently recording your expenses is that you’ll be more present when you’re making your actual transactions. 

How many times have you gone to a restaurant and paid for a meal with only a cursory glance at the bill? Think about the last time you used your credit card to pay for something online, do you remember exactly how much money you spent and on what? 

Recording your expenses right after you make them can help you become more conscious of your spending decisions. 

2) Make better money decisions

If daily tracking makes you more conscious during a transaction, reviewing your spending every month enables you to make better money decisions for yourself over the long term. When you can see that you’re overspending on online shopping every month, you can start taking steps to limit your spending, such as setting a shopping budget for yourself. 

3) Optimise your money

When you don’t track your spending, you won’t know where all the “leakages” are happening. Basically, tracking your expenses helps you to identify where you’re wasting your money, or using it inefficiently. Then, you can make adjustments to your habits to “plug the leaks”. 

One such case happened when I was a student. I wasted so much money printing my assignments and papers at the printing shop that if you add up all the money I spent over 4 years, I could have bought an affordable home-printer instead. 

4) Not knowing is worse than knowing you’re spending too much

Tracking your spending isn’t about being money-minded, or being calculative. It’s about taking active steps to learn about your shortcomings and to improve yourself and your financial situation. 

You might feel afraid to find out that you’re spending too much money. While the awareness you gain from tracking your spending could be accompanied by guilt or discomfort, ultimately you’re making the choice to not allow money to control you. Because not knowing anything about what you’re doing with your money is much worse than finding out that you’re overspending.  

What’s one expense that you’re tracking (or planning to track) that you want to cut back on? Let me know in the comments or let’s chat on FacebookTwitter or Instagram.

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