I can remember looking at my wallet and realizing that the money I thought was there was gone.  Not stolen, or lost.  It was just spent.  And I couldn’t remember where I had spent it.

It was a good lesson for me.  You have to learn how to effectively track your finances before you can make positive changes to your financial situation. When you learn to keep this part of your life well-managed, you alleviate a lot of unnecessary stress and worry.

How to Effectively Track Your Finances

Once I realized how important tracking your finances was, I knew I had to figure out a system to make it effective.  Here are some tips that helped me.

1. Start with the “Why.” Before tracking your finances, you have to know why you want to do it. Maybe you’re finding it’s hard to pay your bills, or maybe you don’t have enough money for groceries each month. Knowing the “why” helps you stay on track when you are losing focus.

2. Be disciplined. When tracking your finances, you must be willing to sacrifice temporary pleasures to prepare for the future. Choose willpower over instant gratification, as this is necessary yet the greatest hurdle to cross.

3. Learn what you are spending right now. What are your habits? Keep track of where your money goes, and every place it goes to. Anytime you leave your home, take a notebook with you to jot down what you’re doing and how you’re spending your money.

4. Keep track of everything. Record both big and small spending. You may not think that your coffee and breakfast muffin was a big deal, but over a period of time, this kind of indiscriminate spending can cause big problems.  The little things you do can really add up, and it’s easy to forget about them.

5. Don’t forget to track cash. It is somewhat easier to keep track of what’s being spent on credit and debit cards, since there is a record of it. But don’t forget cash. It’s really easy to let those small bills and coins disappear on small purchases.  Write it down in a notebook or keep track of it on your phone.

6. Sort your spending into categories. Tracking is made easier when there is a logical system to follow. Divide your spending into categories such as entertainment, living expenses, savings, and any other areas your spending may fall into.  This can help you figure out areas in which you tend to overspend.

7. Use a spreadsheet. This can help you with quick data entry of your numbers, and with being able to retrieve your info quickly. You can create your own, or find free ones just by doing a quick internet search.

8. Use an app. Look around for an app that will help you track expenses, and some are not.  Use a few before deciding which one suits you and works best for your situation.

9. Revise things repeatedly. You should begin to see patterns in  your spending and be able to make choices about what needs to be changed. It is always good to regularly review your goals and budget to make sure it fits with your life.

10. Stick with it. Tracking your finances is no easy chore, but it gets more manageable with practice. Keep on going, even when you wish you didn’t have to think about it anymore.  You’ll be glad you did.

Learning how to effectively track your finances is a life skill that takes practice. It may feel unnatural and restrictive at first, but with a little bit of effort you will be able to pinpoint your financial issues and create a plan to make your spending habits more effective and appropriate. Once you can do that, it will give you greater control and freedom.  And that can make all the difference when it comes to your financial future.