Tracking your expenses is a key step in managing your personal finances. Without this simple but essential habit, it’s hard to keep your finances under control. Whether you want to start saving, investing, or you’re planning to take out a loan, you first have to get to know your spending. Regularly monitoring, analyzing and categorizing expenses allows for better budget planning, helps identify unnecessary costs and avoid debt. That way you can reach your financial goals and build a stable future.
Is your passion investing, and you’d rather read about how to make money on the stock market? Do you love competing with other investors and the whole market? You probably want to start investing as soon as possible: hunting for shares, comparing indices, analyzing charts. OK, I get it. But before you start, you need something to invest. That’s why you first have to learn to save. And to start saving, you have to take control of your finances.
Or maybe you’re here because you’re planning to take out a loan? Maybe you want to learn how to manage debt? What to look at and how to do it so you pay as little as possible to make your dreams come true — a cozy apartment, or a new car. OK, I get it. But in this case too, before you start, you have to know your financial means. You have to know how much you earn, how much you spend, what you own and where it came from. To find that out, you have to start by taking control of your finances.
Whatever brings you to my personal finance site Money? Simple!, you have to start by tracking your expenses. Why? The answer is simple: without tracking your expenses you can’t control them. Tracking expenses is the first step on your road to financial success, one you simply have to take. It’s the foundation of managing your personal finances.
Whichever direction in finance you then want to go — loans, insurance or investing — you have to start by building the habit of tracking your expenses. Without a record there’s no control over your finances. Without control there’s no managing your personal finances.
Planning to take out a mortgage?
Let’s go through it together. I’ll help you compare bank offers and choose a mortgage that fits your situation. Click below to learn more.
Tracking your expenses brings many benefits that can significantly affect your financial stability and your ability to reach long-term goals. Regularly monitoring your spending gives you a full picture of where and how you spend your money. That way you can identify the areas where you spend too much, as well as those where you could potentially save.
Control over your spending also allows for more effective budget planning. Once you’re aware of your financial habits, it’s easier to make changes that will help you manage your resources better. What’s more, regularly tracking expenses is a key element of managing your personal finances, helping you avoid debt and build savings.
Better control over your personal finances: Knowing where our money goes helps avoid unnecessary spending.
Easier budget planning: With an accurate picture of your expenses, it’s easier to plan a budget and stick to it.
Saving money: Identifying the areas where you can save.
Avoiding debt: Regularly monitoring your expenses helps you avoid excessive debt.
How to track your expenses?
To track your expenses effectively, you first have to choose the method that suits you best. You can use a paper notebook, a spreadsheet or a mobile app. The key is to note your expenses regularly, ideally every day, so you don’t miss a single transaction. It’s also important to create expense categories — such as food, transport, entertainment and so on — which will allow for better money management and make it easier to analyze where you can save.
Tools for tracking expenses
You can use various tools to track your expenses.
Mobile apps, such as Mint, YNAB (You Need a Budget) or Spendee, offer convenient solutions for monitoring your finances on an ongoing basis.
Spreadsheets in Excel or Google Sheets let you create and keep your own records, which gives a lot of flexibility in tailoring them to your individual needs.
Traditional methods, such as paper notebooks and budget planners, also have their merits, especially for people who prefer writing things down by hand and physically tracking their expenses.
Tracking expenses — practical tips
To track your expenses effectively, it’s worth following a few practical tips:
First, set financial goals based on the expenses you’ve recorded. Setting concrete goals will help you focus on saving and managing your finances better.
Regular expense reviews, done weekly or monthly, will let you analyze patterns and detect anomalies in your budget.
It’s also key to keep up discipline and consistency in regularly tracking your expenses. Visible progress in saving and reaching your financial goals can help keep your motivation up.
Or maybe you know someone thinking about a mortgage?
Refer me to them and give them my contact details. If they reach out and it ends with a mortgage, I’ll share my commission with you.
During a family dinner, Michał was asked to tell the story of how he sold his company.
― Madzia, don’t worry about that laptop! ― said Mum, gathering up the empty plates she could reach. Everyone but Dad had already eaten. ― Michał is a computer guy, after all, he’ll surely help you fix it!
― Oh, how many times do I have to tell you, Mum, that I’m not a computer guy ― Michał replied with a smile.
― Michał, what do you mean, not a computer guy… You were selling… something online over there…
― That doesn’t mean I’m one myself. And even to build my company, I needed help from computer people.
― Really? Now that’s interesting ― said Dad, handing his plate to his wife. – You never mentioned this before.
― This story begins with an unhappy love.
– Oho, this is going to be good – the father-in-law rubbed his hands. – We’re all ears.
Tough beginnings
– When I decided to go to university, I lived like a real student — cheaply, on next to nothing.
― Toast pressed under an iron? ― Magda laughed. Michał smiled too, recalling the popular meme.
― Well, not quite that bad. Rice with sauce at the milk bar. I had to save up so I could spend more at parties. I took a liking to a girl from another group. When everything was going well we’d often chat on Facebook, we even went for a walk a few times, but then contact suddenly broke off. It turned out she’d started seeing some guy in his early thirties. One day, when I saw her getting into his car, I understood. You can’t live without money. I decided that money would no longer be a problem for me.
Michał drank some water; everyone was listening intently, so he went on.
― I read a few books about finance and dug around online a bit. I started by tracking my expenses. I collected all the receipts and entered my spending into Excel. At first it went well — the first week was really a success. By the third week, though, I already had a drawer full of receipts. I gave up. But when I saw the two of them together in the Market Square, walking into one of the pricier restaurants, my motivation grew again. I decided to control my spending once more. The first week, the second — at the last moment I wrote down all the outstanding receipts. I was as happy as a child that I’d come to my senses in time and hadn’t let it get to the same point as before.
― Three weeks later, though, a whole drawer of receipts piled up again. This time the approaching exam session helped.
– Right, that’s the time when you want to do anything else just to avoid studying – Ania chimed in.
– Yes. But looking back, I know that was a more important exam for me than the one on „Ethnic and Cultural Identity”. From then on I kept up with my expense tracking. After three months of regularly collecting receipts and entering them into Excel, I realized it was nothing to be afraid of.
Better money management
― By now I knew how much I spent and on what. I worked out where I could make some savings. To start with, coffee, a second breakfast or lunch at home, and I began setting aside 5%, but after six months I was already setting aside 20%. I found a part-time job at an online shop, and I no longer gave collecting receipts a second thought; controlling my spending had become a habit. I focused on other things.
― Seeing some sign, I’d wonder who the target group was and whether the marketing message was effective. What would I do differently? Books and training on marketing, personal finance… At university I passed banking with top marks. Instead of getting ready for a party, I preferred to spend my Friday evening in the reading room, and then to listen to podcasts and watch talks by foreign speakers. Not only did that let me save even more, but with each week I understood the world of business better and better.
― In the end, talking with a friend studying Computer Science, I hit on the idea of using my knowledge of German to create a site where Polish IT specialists would enter their profiles, and those would be shown to German entrepreneurs. I invested 4,500 PLN that I had set aside thanks to controlling my own finances. I built the site, spending nights on various free or cheap CSS and PHP courses. I bought the right graphics, made a marketing plan, and a friend wrote the code I needed — the part that was beyond me — at cost.
― And that’s how an online service was born, connecting German companies with young IT specialists. Cheaper than German ones, but offering the same quality. I made money on subscriptions from companies that were interested, but also on extra services, like help with translation and with employers communicating with the IT specialists. I finished my studies just as I was signing my first contract with a German firm that makes parts for Airbus. I’ll tell you, I was much happier about that contract than about my bachelor’s diploma. And when my female classmates were finishing their master’s degrees, I decided to sell my business. And I met Ania.
How do I do it?
When I buy something, I always wait for the receipt and put it in my pocket. I used to sit down at the computer every evening and enter all my expenses into a spreadsheet. It took me 2 to 5 minutes a day. Now, though, I’ve simplified it a little and I jot down my daily expenses in Messenger.
Earlier, when keeping records, I split all expenses into basic categories: food, sweets, fast food, household chemicals (cosmetics, cleaning products), clothes for individual family members, and personal money (i.e. pocket money — however that sounds). Now, though, I no longer categorize these expenses — I set a daily target for all everyday spending and try to stick to it. Separately I keep a record of larger expenses and fixed payments (rent, tuition, utilities, the phone plan).
Basic rules
My way isn’t the only right one. It’s a system that suits me, but it doesn’t have to suit you. If you don’t want to collect receipts to copy them into a spreadsheet or a messenger app, there are other ways. However, for tracking expenses to make any sense at all, a few rules have to be strictly observed.
Above all, every złoty has to be written down. If you, my reader, diligently note your expenses, while your partner pays for lunches and coffee at work from the shared account without telling you how much they spent, you’ll waste your time. You still won’t know what happened to 1/10 of your money.
If you, my reader, write everything down, while your partner considers it a whim and brings you only every other receipt (because the kids were shouting, because the cashier was unfriendly, because the till ran out of paper), you’ll also waste your time. You won’t know what happened to 1/5 of your money.
Every złoty spent has to be written down. It can even be the simplest envelope system (like my current one). In our examples, the partner gets 150 PLN for lunches at work during the week. The other partner will get 700 PLN a week for the shopping. That way the most important rule of expense tracking is kept — we’ll know that lunches at work cost 150 PLN and the shopping 700.
Remember that your goal is to find out what happens to your money.
Other ways of keeping financial records
For me the most convenient thing is collecting receipts and recording them in a spreadsheet. That doesn’t mean it’ll be an equally convenient way for you. For different people, different record-keeping methods are more convenient.
The banking system
People who pay almost exclusively by card can opt to categorize their expenses through the banking system or an external app. At some Polish banks you’ll find a system that helps with record-keeping. The banking system assigns payments to particular categories by itself. A significant drawback is that the whole payment is assigned to a single category, which makes it harder, for example, to keep track of how much you spend on sweets or fast food. Using the banking system, you’ll catch fast food („eating out”), but the sweets will sink into the „food and household chemicals” category, together with the chicken, the broccoli, the cucumbers and the laundry detergent.
External programs
A similar solution is to use an external program. You can connect it to your bank account so it pulls the data automatically, or enter it manually from a CSV file. An example of such a solution is Kontomierz (a Polish personal-finance app). The advantage of such apps is that they’re more useful than the categories from banking systems.
Unlike the banking system, Kontomierz will let you split a shop at Lidl into several categories. Kontomierz can play a complementary role: it will record card payments, and you’ll fill in the expenses that were paid in cash.
Mobile apps
You can also use a mobile app. At the moment of purchase you’ll enter the data into the app, or even take a photo of the receipt. The advantage of such a solution is that you’ll have more management options than with a spreadsheet. Generating reports in various breakdowns is a few clicks, whereas in Excel you’d have to change formulas to calculate a different metric.
Don’t trouble your head
Memorizing expenses and entering them into your records later is a poor idea. It’s not worth troubling your head with prices and shops. Above all, there are more pleasant things to think about. Dreams, plans or the people close to you — those are definitely more pleasant subjects to ponder than the prices of yogurt and milk.
In summary
There are a few ways to track your expenses:
collecting receipts + a spreadsheet (or Kontomierz or another personal-finance program),
recording on the go in an app,
cashless payments + reports from the banks.
It’s important to:
record every expense,
have everyone take part in tracking expenses,
not keep records in your head.
Applying these methods will help you manage your personal finances, control your spending and save money. Tracking your expenses is the first step to reaching financial stability and making your dreams come true.
