Key Points
• Start by looking at past financial statements to understand your average monthly income and fixed monthly costs.
• Categorize expenses into needs, wants, and savings for better financial management.
• Use apps or spreadsheets to track and categorize expenses efficiently.
• Automate payments and savings to build consistent financial habits.
• Review spending monthly to ensure you’re sticking to your budget and working towards long-term goals.
Many people aren’t quite sure where their cash goes. They know they have money flowing in and out but couldn’t tell you the details. If you’re among that group, it can be a good thing to start tracking your monthly expenses.
Why bother? Once you know where your money is going, you can decide if this is actually where you want your money to go. You may find places where you’re wasting money and decide to rejigger your spending so you can put more money towards your goals, whether that’s paying down debt, going on vacation, or being able to retire one day.
If you’re ready to learn how to keep track of expenses, these tips can help.
Check out our Money Management Guide.
This article is from SoFi’s guide on how to manage your money, where you can learn basic money management tips and strategies.
6 Ways to Track Your Monthly Expenses
Getting a handle on your spending is easier than you think. Here’s how.
1. Understanding Your Income and Fixed Costs
To determine how much money is flowing into your checking account each month and exactly where that money is going, you’ll need to gather the last six months’ worth of financial statements.
Use these statements to determine your average monthly income (after taxes are taken out), as well as make a list of your regular, or fixed, expenses (such as rent or mortgage, utilities, and car payments). Next, list out your variable expenses — those change from month to month, such as groceries, gas, and entertainment. This is an area where you might find opportunities to cut back.
2. Categorize Spending and Expenses
Once you have an idea of where your money is currently going, you’ll want to put your expenses into categories. This could be a long detailed list. Or, you might simply divide your expenses into three main buckets: Essential spending (“needs”), nonessential spending (“wants”), and saving and paying down debt (“goals”). This approach is known as the 50/30/20 budget.
Needs
Needs include anything that you have to spend money on to maintain a basic standard of living. Using the 50/30/20 budget, 50% of your budget would go to needs.
Examples of needs include:
• Housing
• Utilities
• Food
• Healthcare
• Insurance
This category can include a mix of fixed and variable expenses. For example, your rent or mortgage payment is likely fixed since you pay the same amount all the time. But your utility bills can be variable if you pay more in winter and summer, but less in spring and fall.
One rule of thumb for housing is to spend no more than 30% of your gross (pre-tax) income on rent. This may not be feasible if you live in a metro area with high housing costs. But if you find housing is taking too big a bite out of your budget, you might consider taking on a roommate or moving to a cheaper area of town.
Wants
Wants are things you spend money on but don’t necessarily need to survive. This section accounts for 30% of spending under the 50/30/20 rule.
Examples of wants in a line-item budget can include:
• New clothes that aren’t really needed
• Travel
• Dining out
• Hobbies and recreation
• Entertainment
• Spa or salon visits.
The wants section of your budget is often where you can make the biggest cuts, since these are things you don’t need to spend money on.
Savings and Debt
The remaining 20% in the 50/30/20 budget is dedicated to saving and paying down debt. You could split it equally, and devote 10% to saving and 10% to debt. Or you might divide it differently if you’re prioritizing one financial goal over another.
Some of the things you might save money for in your budget include:
• Emergency funds
• Short-term goals, such as a vacation or new furniture
• Longer-term goals, like the down payment on a house
• A child’s future college education
• Retirement.
Financial experts often recommend saving 10% to 15% of your income for retirement alone, so you might need to re-evaluate how much you’re setting aside for that goal. Increasing 401(k) contributions can help you get closer to that target if you’re not there yet. If you don’t have access to a 401(k), you might want to open an Individual Retirement Account (IRA).
On the debt side of the equation you might have student loans, credit cards, car loans, or other debts. How you choose to pay them down can depend on how much money you have to work with and what’s most important to you. The debt snowball method, for example, can help you pay off debts from smallest balance to highest. Meanwhile, the debt avalanche has you pay off debts based on interest rate, going from highest to lowest.
Recommended: Check out the 50/30/20 Budget Calculator to see the breakdown of your money.
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Emergency Funds
If you don’t have at least three to six months’ worth of living expenses set aside in an emergency fund, consider making that a priority over other goals. The reason: Without a back-up fund, any financial bumps in the road — say, an expensive car repair, medical emergency, or loss of income — could force you to run up credit card debt that could take months, even years, to get out from under.
You can use an emergency fund calculator to help you determine how much you should save.
3. Prioritize and Automate
Prioritizing monthly expenses means deciding where your money will go first. This might include monthly bills and basic living expenses, along with saving and extra payments on debt. What’s left over after that can go towards your wants.
The more you can automate your finances, generally the more successful you’ll be at budgeting and tracking your money.
Some of the payments you might choose to automate include:
Some of the bill payments you might choose to automate include:
• Mortgage or rent payments
• Utilities
• Cell phone and internet bills
• Car insurance
• Student loan payments
• Credit card bill payments
• Transfers to your emergency fund/other savings
• Retirement contributions.
Benefits of Automation for Financial Success
Here’s a look at some of the benefits of putting a portion of your spending and savings on autopilot:
• Reduces the risk of missing payments and getting hit with late fees and interest charges.
• Helps you build a consistent savings habit without having to remember to transfer money into savings or investment accounts.
• Minimizes the effort required to manage your finances manually.
• Removes funds from immediate reach, helping you avoid the temptation to spend savings on impulse purchases.
4. Set Up a Spreadsheet
To track your monthly expenses, you might set up a simple spreadsheet where you list your income and monthly expenses and set saving targets. You can use the SUM function in a spreadsheet to automatically add values together. At the end of each month, you fill in the data and see how everything lines up.
Key Spreadsheet Templates for Budgeting
If you’d rather not go to the trouble of setting up rows, columns, and formulas, you could simply use a pre-made spreadsheet template.
For example, Google Sheets offers free pre-made budget templates, such as an annual budget and a monthly budget. Or if you have Microsoft 365 software, you can download a free pre-made Excel template for budgeting, such as a monthly budget, personal budget, or household budget.
5. Use an App
If you’d rather not have to turn on your computer and manually enter values, you might prefer using a budgeting app for tracking monthly expenses.
These tools can typically link to your bank and credit card accounts and will periodically pull transaction data from your accounts. This allows you to see how much you’ve spent right on your screen in one simple place; no toggling back and forth.
Some apps even allow you to tag or categorize expenses and create graphs or charts so that you have a visual representation of where your money is going each month.
6. Track Your Money With Your Bank’s Help
Many banks provide built-in expense tracking features within their online banking platforms or apps. These tools can often link to outside accounts, track and categorize your transactions, and offer financial insights that can help stay on top of your budget.
For instance, SoFi can help you to:
• Connect financial accounts in a personal dashboard
• View and track expenses
• Monitor your credit scores
• Create a budget plan
• Track retirement savings and other money goals
• Review your debt situation.
Why Is Tracking Your Spending Important for Financial Management?
Tracking your expenses is essential for managing your money because it provides transparency into your spending habits. After a few months of tracking your spending, you’ll likely have a clear sense of where your money is going. This information can empower you to make better financial decisions moving forward.
How Tracking Supports Long-Term Financial Goals
When you spend haphazardly — and simply hope it will all work in the end— you can end up overspending on things that don’t mean that much to you, while giving short shrift to the things that do, like saving for a home, a child’s college education, or retirement.
It’s generally much easier to start saving for these milestones early, then to try to catch up later. This is due to the magic of compound returns — when the returns on your money get reinvested and earn returns of their own. The earlier you start saving for long-term goals, the more you benefit from compound growth.
How Often Should You Review Your Spending?
It’s a good idea to review your spending at least once a month. This allows you to see how your actual spending and saving amounts line up with your plan, and if you need to rejigger your budget for the next month.
Setting a Routine for Monthly Expense Reviews
To get into a routine for monthly expense reviews, you might choose a specific day each month (ideally at the end) to review your expenses.
If you’re budgeting manually, this is when you would gather your bank/credit card statements and receipts and log in your income and expenses. If you’re using an app, most of this work may already be done for you.
Either way, you’ll want to compare your actual spending to your planned spending, identify areas of overspending, and make any needed adjustments to your budget for the following month to ensure you’re on track with your financial goals.
Avoid Common Spending Tracking Mistakes
When trying to figure out how to keep track of expenses, you may make a mistake or two along the way. Here are two common ones to keep in mind:
Overcomplicating the Process
Using overly detailed tracking methods can be overwhelming and discouraging. It’s typically better to stick to simple and effective systems that fit your lifestyle. For example, if you’re not a spreadsheet person, don’t feel like you have to force yourself to embrace them. You might consider using a budgeting app, or simply pen and paper to stay on top of your budget. The best way to track monthly expenses is the one you’ll stick with.
Ignoring Small Expenses
Small, frequent purchases can add up significantly over time. To make sure day-to-day cash expenses don’t slip through the cracks, you might jot them down in a small notebook (or the notes app on your phone). Alternatively, you could collect your receipts in an envelope. Either way, it’s important to add these expenses to the appropriate spending categories at the end of the month.
Recommended: Budgeting for Beginners: A Guide
The Takeaway
Tracking your monthly expenses is an essential part of financial success. Whatever method you choose (pen and paper, a spreadsheet, or an app), it can give you key insights into your spending habits. Once you know where your money is going, you can make informed decisions about how you want to spend and save moving forward.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
FAQ
Why is tracking spending important for financial management?
Tracking spending allows you to see where your money is going, and where you might be overspending (or wasting money), each month. When you track monthly spending regularly, it becomes easier to make a realistic budget so that you can spend and save wisely, as well as work toward other financial goals.
How often should I review my spending?
Ideally, you want to review your spending at least once a month, so you can assess your financial progress and make adjustments as needed. Some people prefer weekly reviews for more real-time tracking, while others do daily check-ins to stay on top of their budget. The key is consistency — frequent reviews help you catch issues early, maintain control over your finances, and ensure you’re sticking to your financial plan.
How can I categorize my expenses to get a better understanding of my spending habits?
One simple way to categorize your expenses is to divide them into three main buckets: needs (rent, utilities, groceries), wants (entertainment, dining out, subscriptions), and goals (savings and debt repayment).
With the 50/30/20 approach to budgeting, you would put 50% of your monthly take-home pay towards needs, 30% towards wants, and 30% towards saving (including retirement) and making debt payments beyond the minimum. Depending on your expenses and goals, however, you might need to decide to tweak these percentages.
What are some common mistakes people make when tracking their spending?
One common mistake people make when they track spending is overcomplicating the process, which can make it harder to stay consistent. Other common errors include: ignoring small expenses, which can add up and lead to inaccurate budgeting; and being inconsistent with tracking, which can result in overlooked wasteful spending or missed opportunities to save more effectively.
How do I track spending if I have irregular income?
It can be tricky to budget and track spending if you have irregular income, but it’s not impossible. One solution is to look back at what you’ve made over the last six months, then divide that number by six to determine your average monthly income. You can then use this number to offset your monthly expenses. Another option is use the lowest amount you earned over the last six months as your monthly income to ensure you don’t overspend.
About the author
Rebecca Lake
Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.
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