Step 5 - Track your Expenses & Document Payment Dates

Now that you've developed a budget, you have to track what you spend to monitor where your money goes.  Essentially you've developed your budgeted column (in Step 4) on your worksheet, you now need to monitor your 'actual' column to measure to two against each other.  Your mission is to ensure you spending is equal to, or less than (better, of course) the amount you've budgeted.   There are numerous ways to tracking your spending.  The actual act of tracking isn't hard, but developing a regular habit can be.

To simplify this process, it can be beneficial to use one payment method.  Debt can cause you to jump around using various payment methods with little rationale behind your choices.  Occasionally, using credit, then debit, then cash, with no reason.  To make your spending easier - try and stick with one method of payment.

First, make a habit of asking for a receipt each time you spend.  Keep the receipt in your purse or your wallet.  Then, set a reminder on your phone - an alarm works well - for later in the evening when you're likely to be home.  It could be set for 8PM each night and read - "write down daily expenses".  You'll haul out the receipts you've collected during the day and write down everything you spent including any automated payments that might've been processed through your banking - like, rent, cell bill, etc.

To record transactions, you can take advantage of an app (Expense Keep or iSpending are options).  In addition, you can use a spreadsheet, a plain piece of paper, or you can download my Budget Creation Workbook (which includes an expense tracking worksheet) below.

For each expense, you'll want to include the date you incurred the expense, who you paid, the category (groceries, gas, etc.) the account you spent from (credit, debit, cash), and finally the amount you spent.

Then, set a check-in schedule for yourself, either weekly or mid month to see how much you’ve spent in each area.  You'll add up all the expenditures for each category which will let you know if you need to reign-it-in towards the end of the month.  If it's mid-month and you're nearly through the amount you've budgeted, you'll need to dial things back.

You can also leverage to get an assessment of your spending.  Within minutes, you can link your bank accounts and it will break down your spending for you based on their pre-determined categories.  It won't track cash though - and I think it's important to monitor cash as well. 

At the end of the month write down the total of what you spent in each category by referring to your expense tracking worksheet.  Then tally the entire 'actual' column to measure against your 'budgeted' column.  Take the 'budgeted' amount and subtract the 'actual' amount.  Assuming some of the categories are savings (and aren't being entirely spent each month), you should have a positive balance.

Take any positive amount and move it into a savings account.  If you end up with a negative amount, meaning you spent more than you budgeted, you might consider reducing the amount you budget for next month, or budget the same amount again, and check-in with your totals weekly so you can adjust before the end of the month.

Documenting Bill due dates

When finances become chaos and reactionary, bills can be paid late due to missed deadlines rather than lack of finances.  Do you have a good system for remembering billing payment deadlines?  This includes bills that are due weekly, biweekly, monthly, annually, etc.

I'm sure you're sick of hearing me say this, but YNAB is the best for budgeting AND they are also amazing for monitoring bill payments.  You can log all your bills into an account register and enter their recurrence schedule.  Each time you open the program you can see ahead of yourself as to what is due and when.  Also, bills due each day, pop into the register so they're never forgotten.  If you're not ready for YNAB, here are some tips for tracking your bills using tools you might already have access to.

If you've started from Step 1, you've liked documented all your existing expenses somewhere.  Now, you need to add when each bill is due beside each expense.  If you're not using any software for bill tracking, you can make use of your smartphone, google calendar, or paper calendar.

As an example, take your Electricity Bill.  Enter the approximate amount due into your calendar, then use the 'repeat' feature, and enter when the bill occurs next.  If the bill is roughly $100 every two months, you would add Electricity Bill Due, repeat (every two months), approximate amount $100.  Continue through the balance of your expenses.  If using Google Calendar, you can use a specific calendar for bills only - this way they would be colored coded so they're less likely to be missed. 

Do you know when your bills are due?  Do you continually face lates fees and penalties because of forgotten bills?