Tracking your expenses is one of the best ways to control your finances, but tracking expenses isn’t just about writing down what you purchase and how much you spend.
To truly change your financial habits you need more than the price and description of the items you buy. You need to know how you feel when you buy something new and what is motivating you to pull out your credit card.
When performed properly journaling can provide a glimpse into your spending patterns. As you document your expenses, you can see what you buy, why you are buying it, and how you feel after each purchase.
After you gather this information, you can start making more intentional decisions about your spending. This simple act can improve your finances, but more importantly, it can also boost your happiness and overall wellbeing.
How to Track Your Expenses
If you’ve never tracked your expenses before, it’s time to get ready. You can download an app to help, but you don’t need it. To begin, just grab a small notebook and a pencil.
Put them into your pocket or purse, and wait for the first time you want to buy something. As soon as you feel the urge to pull out your wallet or reach for your credit card, grab that tiny notebook, and write down the purchase details.
Most financial experts recommend writing down your expenses after you’ve paid for them, but in the beginning, I suggest writing them down BEFORE you walk to the register or checkout with your virtual shopping cart.
Here is what you should include:
- The Date
- A Description of Item
- The Purchase Price
- Your Emotions (How You Feel)
- Any Other Details That Explain This Purchase (Motivations)
Track Your Expenses and Add Extra Details
The first three bullet items are self-explanatory and easy enough to document, but the last two provide the biggest bang for your buck.
As you document each new expense write down how you feel at that moment. Are you happy, sad, stressed, angry, or in a rush? Jot down a note to explain any details that would explain why you bought this item or experience.
Then write down any other details that explain this purchase. There are many reasons we buy things. For example, did you purchase lunch because you wanted to join your coworkers for an outing, or were you too tired to pack a brown bag this morning?
How did you feel about the item you bought? Do you feel guilty about spending twenty dollars on lunch, or did you eat the most fantastic sandwich of your life?
We will dig through the details of what you wrote later. Right now, the goal is to take a quick note of your purchase so you don’t forget about them.
Track Your Expenses to Understand Your Motivations
Financial enthusiasts often focus on math, but math and money are not the same things. There are many emotions mixed up in our financial decisions that dollar signs and simple descriptions can’t explain.
Those first three bullet points don’t provide enough insight into why you are buying new things. That’s why I encourage you to capture details other than price, date, and description.
You can use this footnote as a blank box for anything you want to add, but I suggest adding details that explain your motivations for spending. The goal is to figure out what motivates you to spend money and how you feel after spending it.
For example, buying an ice cream cone while walking through the city with your friend is a very different experience than buying a tub of it from the grocery store.
Try to capture the way a purchase makes you feel. Does it perk you up? Lift your spirits? Remind you of a great memory? How can you get more purchases to make that impression upon you?
Let’s say you enjoy going out to eat with your coworkers because you can spend time with them. Are there other ways to enjoy their company without spending money on food?
Can you ask them to join you for a walk during your lunch break or are you willing to give up other expenses that don’t provide as much value so you can still dine together?
Track Your Expenses to Understand Your Emotional Needs
Are you spending money because you are bored, lonely, tired, or stressed? If so, do you need to spend money to perk yourself up? Can you form better habits for dealing with these negative feelings rather than buying something new?
After you buy something, how do you feel about it? Do you still feel the excitement weeks after you buy it? How long did your emotional boost last? If you had to purchase that item again when you were in the same mood, would you?
Of course, the water and electricity bills don’t make us happy, so you don’t need to write down how you feel when you pay for them. But, you can rank your morning cup of coffee, lunch with coworkers, and the new swimsuit you bought for an upcoming vacation.
As you track your expenses, natural patterns will emerge. Maybe you shop when you are stressed or feeling guilty for working long hours. Perhaps you spend more for social reasons, to feel included, or to visit with friends.
The more you track your expenses, the easier it will be to see these patterns. Why and when do you spend? If you are happy with your spending patterns, you don’t need to change them. On the other hand, if your financial habits need a makeover, this is an excellent way to figure out how your emotional wellbeing impacts your money.
Track Your Expenses to Change Your Behavior
As you track your expenses you will begin to alter your spending patterns. How does that happen? The simple act of writing down your purchases forces you to press the pause button.
Most of us rush from one activity to another. We mindlessly purchase groceries, toys, decorations, home decor, furniture, and so much more. As we shop, our minds often focus on the next place we need to be or the next thing we need to do.
We fill our shopping carts full of stuff, load it into bags, and prepare to unpack it after we get home.
Tracking your expenses provides breathing space. It allows you to pause just long enough to decide if you want or need the stuff you are about to buy.
Think of tracking your expenses like meditation. During meditation, your mind often wanders off to other thoughts. When this happens, you bring your focus back to your breath and wait until your mind wanders again.
Before you reach for your wallet, try to refocus your thoughts on your finances. You don’t want to wait until you get a bill thirty days from now to reflect on your spending choices. You want to be present and mindful while you are buying something.
As soon as you reach for your notebook, you will begin to reflect on your spending.
My Personal Experience with Tracking Expenses
I began tracking my expenses as a recent college graduate. Despite living in a group house with six other people and driving my dad’s rusty old station wagon, my pockets were often empty.
While I cut down on the most significant expenses (housing and transportation), I still managed to rack up many small expenses. One day I sat at my desk and tried to figure out what I bought that week.
My mind was blank. I couldn’t figure out where my money was going. It didn’t seem like I spent much, but clearly, I spent more than I thought I did.
At that moment, I decided to start tracking my expenses. Whenever I left the house, I carried a small notepad and a mini-golf pencil with me. Each time I bought something, I pulled out that pencil and wrote down my purchase.
Are You Happy About the Things You Buy?
Sometimes I regretted the purchase the second I pulled out that pencil, while other times, I relished in them. There was $5.00 for a cup of hot cocoa, $11.00 for a bestselling book, $12.00 for lunch, and $3.00 to take the toll road to work.
Each week I tallied up those little costs, and by the end of the month, I began to rank them. How much did that cup of hot cocoa perk me up on a cold winter day? Did I even read that $11 book?
The more I tracked my expenses, the less I wanted to buy. As I looked at that little piece of paper full of pencil marks, I realized most of my discretionary purchases weren’t making me happy.
Sometimes I bought things because I was feeling sad or lonely. Many times I bought something, like lunch or dinner, because I was unprepared.
Every day I bought overpriced food from the salad bar inside my office building. The food wasn’t delicious, but it was convenient.
I ate in the cafeteria to hang out with my coworkers during our lunch break, but I didn’t need to buy that overpriced meal to enjoy their company. After tracking my expenses, I cut out that cafeteria meal and began packing my lunch a few days a week.
Making Intentional Decisions with Your Money
Tracking your expenses is not about cutting everything from your life. Would you rather pack your lunch four days a week so you could eat at a fancy restaurant once a week, or would you rather eat five mediocre meals? Would you rather buy a latte each day or a ticket to a concert once a month? The choices are yours.
By tracking your expenses, you get to see where your money is going and where you want it to go. Each time you track an expense, you condition your mind to think carefully about the next purchasing decision.
As you write down the numbers, names, dates, and feelings, you begin to reprogram your brain to pause and reflect before buying something new.
Tracking Your Expenses Digitally
Eventually, you won’t have to write down every expense before you make it. Over time you will naturally change your habits to think before adding new items to your shopping cart or paying for experiences that don’t provide you with long-lasting value.
After a few months, you can use a digital app to track your transactions or simply review your credit card transactions. But don’t give up on this habit just because you don’t have to do it at the point of sale anymore.
Make sure to review your credit card bills each month. Digital subscriptions and other recurring fees often pop up months and years after we sign up for them. As you check your account, ask yourself if these expenses still provide you with value and joy. If they don’t mercilessly cut them.
The Value of Tracking Your Expenses
Writing down your expenses won’t create an immediate change in your spending habits, but you will begin to see a difference in your thought process over time.
When you track your expenses, you begin to reflect on them more deeply. You stay present during each purchase rather than allowing your mind to wander elsewhere.
When you contemplate your decisions upfront, you won’t make as many financial mistakes. You will also learn to weigh those decisions more carefully.
Remember, the goal is not to eliminate all discretional purchases. You are not avoiding buying anything new. You are merely redirecting your money to activities and objects that truly matter.
5 thoughts on “How to Track Your Expenses and Manage Your Money”
I’ve been amused by the idea of tracking sentiments/emotions in my bookkeeping ever since your “Can Money Buy Happiness?” post. It’s a great idea!
Sadly, I don’t think I could adopt your system as-is into my own finances.
We already cover a lot of the benefits of tracking emotions by virtue of mindfulness and discussing all my (few and far between) discretionary purchases with my dearheart.
I’m going to keep playing around with the idea to see if I can find a way to tailor sentiment tracking to our finances.
That said, your piece about intentional living resonated with me.
After I got serious about tracking my expenses, I realised that I had been mindlessly accepting the status quo of spending.
It made me pull back and reflect and realise that e.g. I valued getting lunch with coworkers — just not every day.
“What you measure, you can predict and influence,” and all that.
Thank you for your comment. Cool blog name, by the way! If you already have a system of record, it’s tough to incorporate emotions and motivations into it. That’s why I suggest doing this on a piece of old fashioned paper in the beginning. Unfortunately, spreadsheets and personal finance trackers don’t enable you to save this information in a way that’s easy to view and organize. We use GnuCash to track our expenses, but I also keep a separate spreadsheet for monitoring my emotions, and it’s a giant pain. Thankfully, once you do this for a month or two, you get a general idea about what makes you happy and what’s a total waste of money. Once you get a ‘feel’ for it, you can stop tracking it every month or simply track it every so often instead of every month. If you figure out a way to incorporate sentiments and emotions into your tracking, let me know. I’d love to figure out a better way to do it!
I used to track my finances and it was very helpful to me. I fell off the wagon and it’s my new years resolution. I’m looking forward to trying your method. I’m terribly forgetful so I’m going to double check myself with Mint so I don’t forget anything.
It’s so easy to buy things you want but make no difference to you, especially when you’re paying with a credit card. Then they become clutter and you throw them away. I’m always looking for ways to make better decisions about money and spending. Timely post!
Oh the clutter, the clutter, the clutter!!! Tracking expenses has helped me stop buying unnecessary stuff at the point of sale. I hate wasting money, but I hate clutter even more! Let me know if you end up tracking this way. I’m curious to see the results of someone else who tries this method.
Quite Informative Nice tips.