How to Track Spending: Why it’s ok to get rid of that big pile of receipts.
Approximate read time: 7 minutes
How many times have you tried to track your spending? Here’s some common responses I get when I ask my clients that question:
“My bank keeps track of that for me.”
“You mean like how much my bills cost?”
“I keep my receipts.”
“I tried that once, it didn’t work.”
“Oh, I know what I spend my money on.”
How you track your spending must be customized for you, by you.
Just expecting yourself to write down what you spend money on, just like budgeting or focusing on our needs instead of our wants is one of those pieces of traditional personal finance “wisdom” that falls apart when we attempt to use it.
Without a clear purpose, and without a holistic philosophy of our relationship with money, traditional tools will continue to fail us. But because we haven’t been given any other tools, we just keep using the old ones, telling ourselves we “just need to finally get it together.”
If just keeping our receipts or checking our account balances worked, we’d all be just fine. But we aren’t.
Tracking isn’t as easy as writing down how much you think next month’s bills will be, or having a clever bank app that categorizes things for you, but it’s certainly not as hard as most people make it out to be.
Let’s give tracking your spending an overhaul.
First, what are the purposes of tracking?
How to track your spending step 1: Awareness, not judgment
Judgment, shame, and blame are never something a Financial Coach should bring to the table. In my experience, my clients bring plenty of that on their own, they do not need mine as well.
Regardless of their income, my clients are frequently uncomfortable with the idea of tracking because they fear my judgment, sure, but mostly they fear their own.
“I’m not going to like what I see.”
This one sentence tells me they are conflating awareness and judgment. They are not the same thing.
Tracking will never be my first conversation with a client. They don’t trust me, and foremost they don’t yet trust themselves. Awareness without shame is one of the primary tools I teach. I frequently use the word “observation” for this idea.
We are observing your spending as if you are both a wild animal and also a scientist following the animal around. The scientist does not want to disrupt the natural life of the animal (your spending), they don’t make moral judgments on what the animal does, they simply observe.
This level of detachment is the first step in getting some perspective. Without that, a person begins tracking (or any other financial intervention), gets overwhelmed or bogged down in the receipts and the frequent “I shouldn’t have bought that” conversations with themselves and then, of course, they stop.
If you want learn how you track your spending in a way that will work for you over time, practicing awareness without judgment is critical!
How to track your spending step 2: Creating a new routine
Ideally, tracking would move seamlessly into a Zero-Based Budget. In order for that transition to be painless, having a routine or ritual to your tracking is crucial.
There is no one way to track, and the logistics of how we track can (and should) change over time.
Coaches and clients frequently want me to tell them the “right” way to track. But like so much regarding our finances, there is no one right or wrong way to do anything. Tracking your spending requires a little experimentation and flexibility.
Couples frequently track differently. For example, one partner may be just fine writing everything down on paper, and the other may like to keep notes on their phone.
Here are some experiments my clients have tested out as they build their tracking routine:
- Sticky notes
- Notebooks (of various sizes)
- Using a special colored pen just for tracking
- Random bits of paper found around the house
- Customized google form
- Voice notes on the phone
- Texting themselves
Having trouble establishing your tracking routine?
No problem! Often the pressure of seeing the numbers while tracking can disrupt any kind of routine we’re trying to build. So let’s take that pressure away. Here’s what I’d like you to do:
For one week I’d like you to write down (on paper) what you spend money on, then throw that piece of paper away.
Sounds crazy, right?
The data isn’t nearly as imporant as the routine itself. We can always go back to our credit card or bank apps and get the data. If just having the data worked, we’d all be fine. The difference here is we’re trying to build a routine that will work for YOU. So focus on the routine of tracking, not the data. So go ahead and track as much of your spending as you can, but then crumple it up and throw it away.
Try this for about a week and then step up to keeping your notes.
How to track your spending step 3: Gathering data
It might seem like this would be the primary purpose of tracking, but data can always be gathered later. Building the routine, ad practicing awareness of your spending without judgment means that not only will you keep with tracking, but you’ll get better data!
Data is important, but not as important as getting the routine of tracking to a comfortable place.
Let’s go over some guidelines, now that the purpose of this new behavior is clear.
You’re after just three pieces of information
For now at least, you only need to track the date you spent the money, how much you spent, and what it was spent on. If you want to keep track of the store you spent it at or the source of the money, or any other particular, that’s fine too.
Give tracking with receipts a try, BUT…
It seems like the simplest thing in the world, we’ll just keep the receipts and then at the end of the day write down each expense. In reality we end up with a purse, wallet, or bag full of receipts, which gets overwhelming and intimidating, then we all end up frustratedly trashing the receipts. Try it out in the spirit of experimentation, but if it doesn’t work, be ok with that and try something else!
Try not to change your behavior
This is going to sound odd, but I don’t want you to change your spending behavior at all, if possible. We are trying to get a nice, clean picture of what your spending looks like. Like you are the wild animal and the scientist who’s taking field notes on you. We want to get honest data.
If you find that you’ve changed your behavior, just make a mental (or physical) note of that too.
Don’t go back in time, and don’t fill in the blanks
Just for now, while you are building a new routine, don’t worry about going back in time to track.
Don’t start as of this morning, or the first of the month, start as of RIGHT NOW. After this becomes more routine, you’ll be able to go back in time or fill in blanks, no problem, but not to start with.
If you find that you’ve stopped or forgotten, don’t worry about it. LITERALLY everyone starts and stops. I started and stopped quite a bit at first. Everyone does. If you find that you’ve forgotten, just restart right then, don’t try to fill in the days you missed.
Trackers are a hot mess
Trackers are messy. Especially first trackers, as people are going through some trial and error for what works for them and what does not.
While the goal is to capture everything, I never expect a client to come back with a beautiful, complete tracker. You’re building a new routine here, and that takes some time.
This is unnatural
I am asking you to do something odd. Tracking will never become a habit, and it shouldn’t be. Habits with our money are what get us into trouble, after all. Over time this will become a ritual or routine, but (again) that takes time.
Remember the purpose of tracking: Awareness and routine building.
Gamify it
Once you’re a little more comfortable with the routine of tracking but you haven’t moved into a full Zero-Based Budget, you might spend a week or two playing a game. Pick a category of spending (what we call buckets) and aim to spend a certain amount of money on that in a certain amount of time. You’re trying to spend EXACTLY that dollar amount… no more, no less.
Examples might be trying to spend no more or less than $75 on eating out in 2 weeks or trying to spend exactly $100 in groceries this week. How close can you get?
This tool may not be for you
You may be the rare person who already knows where every penny goes. Maybe you’ve already mastered your own system for tracking, and that is truly amazing! Keep going!
I can guarantee you, though, that someone in your life has tried and “failed” to be more aware of their spending and consequently they feel like they are the only one in the world who can’t “get their shit together.” Your job is to be brave enough to share what you know.
Your very next step:
Once you’re feeling even a little more comfortable with tracking, it’s time to put this data to good use! Please see Zero-Based Budget.
Let’s Reflect a bit:
What do you think you’ll notice as you start tracking your spending?
What do you want to experiment with on how you track your spending?
How easy or hard do you think it will be to create this new routine?
Remember, this is about observing, not judging!
Next Recommended Article: Lifestyle creep
Last updated: April 2023