Tracking expenses is an excellent starting point for managing a household budget. Most families and businesses create a monthly budget that is monitored and reviewed against the actual money spent each month. These expenses typically include food, gas, clothes, and entertainment items. When monitoring monthly expenses, it is important to make a log that is simple to use. This will make it easier for the family or business to use on a regular basis.
There are many types of spending that can occur on a monthly basis. This ranges from standard utility bills to more frivolous items including dinners, movies, and vacations. When tracking monthly expenses, it is important to start with a log that is based on specific categories. This will make it easier to determine what expenses are necessary and what are considered more discretionary.
Using a receipt deposit jar or basket is a good starting point for tracking monthly expenses. This is a container that can hold all expenses end receipts from the week. If an individual has a cash expense, he should create a manual receipt with a scrap piece of paper and place it in the basket. These receipts can be entered into the monthly expense log on a weekly basis and represent the paper record of the money spent.
There are many automated tools that can assist an individual in tracking monthly expenses. These are spreadsheet programs that contain both columns and rows of data. As a good practice, expense columns should be created with large generic categories. This will make it easier to track and enter on a weekly basis. Some examples of generic categories include food, clothes, utilities, and entertainment.
Once expenses are tracked for several months, it is much easier to determine the yearly budget of a household. This is because prior expenses are generally a good gauge of future expenses. This organization process makes it easier to budget for future items including birthdays, and other annual expenses.
After a few months of tracking monthly expenses, it’s a good idea to create a more granular look at how money is being spent. This is done by making sub-category expenses under each expense item. As an example. phone, electric, and heat can be sub-divided within the utilities category. This makes it easier to determine which utilities are costing the most money each month.
Tracking monthly expenses gives an individual insight about where he is spending his money. This can help with long-term financial planning for children, education, and retirement. Without an audit of expenses, it is difficult to save money because it is hard to determine where the savings can best be met.
