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Personal Finance

How to Keep Track of Your Spending

spending money, wallet, budget
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We have all heard that making a budget, and keeping to it, is one of the best things you can do to stay out of debt and make your financial goals come true. Yet, only 30 percent of all Americans have a monthly budget, and, for Millennials, the percentage is even less. If you have gotten through the year with a roof over your head and eaten some food on a daily basis, you might think you don’t need to track your spending; you’re doing OK. You will still find it useful to see exactly where your hard-earned money went.

Budget reminder

A budget is just a way to compare your income and your expenses and to ensure that your spending stays within your income as well as including those elusive goals such as retirement, buying a house, going on vacation or just getting out of debt. There are many online resources to help you to tabulate all your income (which is usually the easy part) and your expenses (the harder part) including ones that don’t necessarily come in on a monthly basis, such as car insurance. Various online tools from are free and also allow you to connect the tools to your bank accounts and credit cards.

Still, one of the best things you can do to really get a down-and-dirty look at your money habits is to track your spending for a month. Getting those year-end statements that your credit card so nicely offers that show what percentage of your spending went to entertainment or to clothing, doesn’t compare to what you can learn with a little notebook and pen in which you write down each and every penny you spend for a month.

You may be surprised

You thoroughly enjoy the latte you buy every morning at the coffee bar, but add them up on a monthly basis and include the raisin scone, and that’s $180 a month. What’s more informative and probably more surprising, is those impulsive purchases like the $25 knit cap you add to your cart when you’ve just gone online to buy socks. 

By including each purchase, big or small, you will have a realistic sense of what you are actually spending and which expenditures are pulling heavily on your disposable income. David Bach, a best-selling author and financial advisor, says it is the small things that we spend money on that both add up and, if redirected, can result in large savings over the long-run. “If we think about it, and change our habits just a little, we could actually change our destiny,” he said. Bach has invented the term the “latte factor” and developed a handy little online tool called the latte factor calculator.  In the calculator you pick an expense, say “latte,” then you choose a cost, say $5, then you pick an annual interest rate, say 3 percent. Press “calculate,” and you get the amount that daily expense would provide in one year if saved at that interest rate. Try it, it’s both fun and scary.


The goal of this exercise of writing down each and every expense for a month is not necessarily to save money. It is more to provide yourself with cold, hard facts. It’s to be mindful of how much you spend and on what and whether your more conscious self agrees with your impulsive sense that your money is well-spent. Then, if you decide you want to spend less or save more, you will have a road map of how to do it.

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