The purpose of tracking your finances is to know where you spend your money each month.
Without this critical step, you just don’t know where you stand or where you are going. Which means, if you have a financial goal, like buying a new car, a home, or leaving your job to stay home with your kids, you need to track where your money is going.
But don’t let the confusion labeling your expenses overwhelm you and prevent you from getting started. I’ve compiled a list of main umbrella categories and what types of spending will fall under each category.
Use as many as you like, experiment as you go, and find what works best for you!
I also created an Expense Tracking Worksheet that you can access from my free Resource Library. Find out how to gain access below.
Contents and Quick Links
Expense Tracking Categories
- Home insurance
- Property tax
- Home Maintenance
- Home Improvement
- Home Security
- Auto loan
- Road/Bridge toll
- Auto maintenance
- Oil changes
- Larger service (brakes, fluids, etc.)
- Auto repair (estimate based on make/model/year of car)
- Public transportation
- Roadside assistance (onstar)
- Other forms of transportation and associated maintenance (bike, motorcycle, recreation vehicles)
- Federal income
- Accountant fees
- Filing fees
- Fast food
- Work meals (cafeteria/eating out because you don’t have a lunch or choose to not eat it)
- Meal service
- Children’s hot school lunches
- Coffee shops
- School tuition
- After school activities
- Gear and clothing
- Sign up
- Summer camps
- Baby expenses
- School supplies
- Child support
- Doctor’s office visits
- Specialty care
- Mental health visits
- Dental care
- Vision care
- Over the counter medications
- Vitamins/ supplements
- Health Savings Account (HSA)
- Flexible Spending Account (FSA) for health or childcare
- Private mortgage insurance
- Personal property (valuables)
- Long-term care
- Yard waste
- Anything that doesn’t quite fit into any category
- Unusual, non-recurring expenses
- Interest payments
- Additional payments beyond minimum due
- (Include all expenses in every category as you spend it, whether it was paid by cash, debit or credit, therefore I don’t include monthly credit card payments as you already accounted for the purchases in your expenses. Your expenses should no longer be greater than your income)
- Hair color
- Nail salon
- Beauty products
- Veterinary care
- Pet sitter/dog walking
- New clothes
- School clothes
- Professional clothes
- Dry cleaning
- Cleaning supplies
- General household supplies
- Office products
- Pool/yard care
- Service worker gifts (teacher, admin, coach)
- Going out
- New technology
- Yard care
- House cleaning service
- Meal delivery services
- Professional society dues
- Music (spotify/pandora etc.)
- TV streaming services (HULU, Netflix, etc.)
- Amazon Prime
- Software subscriptions
- Identity theft
- W2 Income
- Spousal support
- Child support
- Social security benefits
- Side hustle income
- Investment income
- Reimbursed job expenses
- Emergency fund
- Investing fund
- Home fund (down payment, improvements, large repairs)
- College savings
- Fun savings
- Gift savings
HOW MANY CATEGORIES DO YOU NEED?
That is totally up to you! You may prefer to keep it super simple and just use some of the main categories and list individual expenses throughout the month all together. Or, you may prefer to see as much detail as possible in order to really pinpoint where every dollar is going and how you may be able to cut costs and save more next month.
It is entirely up to you.
The most important thing is to do the tracking. Experiment over the next few months and find what level of detail works for you.
See How To: Track Your Personal Finances for tips on how to get started.
YOU’VE TRACKED FOR THE LAST MONTH OR TWO, NOW WHAT?
First, go back in time and review the last 3-4 months of spending. Take the average over that time period for an idea of what you are spending.
Of note: Don’t be hard on yourself if you are surprised by your spending habits. It might be difficult, but start off with just tracking and zero judgement. This goes for both you and your partner if you are working on combined finances.
Once you have an average over a few months of spending, you have a budget! This is your starting place. As you track your spending and become more aware of how you are spending, you will likely find that you automatically make more frugal spending choices.
Evaluate where you are overspending, or where you can cut costs. Maybe it’s eating out, maybe you can cut your cable and switch to Netflix. Find some areas and start making small adjustments.
The key is small. One or two small changes at a time, then see how it goes. If you feel deprived and unhappy with the loss, go back to how you were spending and find a different area to cut back on. The point is to be aware of your spending, make progress, save more money, and reach your financial goals. Not to be frugal and unhappy! If that morning latte makes your day, go for it! Just make sure the expense fits within your spending limits and doesn’t hinder your ability to save and move forward.
- Don’t let overwhelm prevent you from tracking your finances.
- Tracking finances is personal, experiment with methods of tracking and the number of categories you use in order to find out what fits for you.
- Be kind to yourself, don’t judge your spending as you track over the first few months. Your goal is to discover where every dollar goes.
- Track for 3-4 months and then take the average of your overall spending for each of your categories. If you’re like me and don’t have the patience to wait that long, use your credit card and bank statements to track your spending over the past few months.
- Once you know your spending habits, you can begin to cut back on expenses and increase your saving rate.
- You will likely find that you will be much more aware of your spending as you begin tracking every dollar, and you will begin to make better spending decisions.
- Use your categories and average spending to set a budget. See if you can stay within budget each month, or even better, stay under budget.
- Have a plan for your savings. This will motivate you to keep tracking, spending less and putting those saved dollars to use.
- Download the Expense Tracking and Monthly Budget Worksheets from my free resource library.
- Use as few or as many expense categories as you like to track your spending over the next month.
- If you are impatient, pull up your credit card and bank statements for the last month and track your spending within each category.
- Play around with the categories you use. Find what works for you.
- Use your spending as a guideline to establish a budget.
- Get started today and start saving more money!