TRACKING SPENDING

WHY TRACK SPENDING? Provides an objective view of your finances

Helps you live within your income

Enables you to chart your financial future

RECEIPT METHOD1. Get a receipt for all expenditures

2. If you don’t have one, create one by writing the amount spent, for what, and to whom

3. Label the receipts by expense categories from your spending plan

4. Regularly record amounts and compare them with the planned amounts in spending plan

5. For this method to work, all family members must follow this procedure

ADVANTAGES OF RECEIPT METHOD Easy to sort Simple to total Serve as proof of purchase Important for tax purposes

CALENDAR METHOD Write in income whenever you receive

it Write in when bills and expenses are

due As you pay each bill, cross it off

AdvantageMay be used to plan for larger irregular expenses that don’t occur every month, such as insurance payments, property taxes, or holiday gifts

ENVELOPE METHOD Set aside money for various expenses in

separate envelopes on a regular schedule, using expense categories from your spending plan

Label envelopes with a specific purpose such as GAS or GROCERIES and the amount budgeted for each expense

ENVELOPE METHOD (CONT.) When you receive income, put the proper amount in each

envelope

When the time comes, take the money for the expense category and note the date and amount spent on that envelope

At the end of a month or pay period, transfer any money left into a savings or emergency fund account

ADVANTAGES OF ENVELOPE METHOD

Works well for tracking and controlling expenses purchased with cash

Simple, with far less recording or paperwork compared with other methods

Income conveniently divided to cover all anticipated expenses

Easy to see how much money is available to spend

DISADVANTAGES OF ENVELOPE METHOD

May be too tempting to “borrow” money day-to-day or if a shortage occurs

Having cash readily available may encourage careless spending

Risky to keep a lot of cash at home

MODIFIED ENVELOPE METHOD

Combines checks and/or specially designated savings accounts

Checks are used for larger fixed expenses, such as rent or mortgage payments, car payments, and utilities

Envelope method used for cash expenses, such as food, household expenses, and transportation

CHECKBOOK METHOD Paying by check for most expenses, recording transactions

immediately, and keeping an up-to-date balance

Record what each check is for, where it was spent, and the amount

Balance the checkbook regularly and compare it with the monthly statement from your financial institution for accuracy

CHECKBOOK METHOD (CONT.) On a regular basis, total the expenses recorded in your

check register by expense categories and compare the totals with your spending plan

Total amounts can be recorded in a binder or notebook to complete the picture of where your money is going

ADVANTAGES OF CHECKBOOK METHOD

Provides valuable information about your spending patterns

Provides proof of payment

Two people owning a joint checking account can write checks from one checkbook

DISADVANTAGES OF CHECKBOOK METHOD

Possible bank charges that add to your cost, such as fees for a low balance, for each check written, or ATM card and debit card fees

Joint checking accounts can result in problems if there is no coordination. Checks may not be recorded and or the checkbook may not be balanced

ACCOUNT BOOK METHOD Keep a daily log of expenses in an account book that you

can create or you can buy an account book

Across the top, write in columns for each expense category from spending plan, possibly including the amount budgeted

As you spend money or pay bills, record expenditures in the appropriate column

ACCOUNT BOOK METHOD (CONT.)

On a regular basis (weekly, monthly, etc.), add all of the entries for each category to determine how much you spent

Or you may subtract each entry from the amount budgeted in each category to determine how much you have left to spend

Each category can be compared to spending plan to see if goals are being met

ADVANTAGES AND DISADVANTAGES OF ACCOUNT BOOK METHOD

Advantage - provides a more accurate, up-to-date picture of your financial situation

Disadvantage – everyone in the family must be diligent in recording expenses almost daily for records to be accurate and up-to-date

COMPUTER SOFTWARE METHOD

You can create your own expense sheets and tracking system by using a basic computer spreadsheet program

You also have the option of purchasing a commercial software program designed specifically for personal finance

Check with these companies to determine what program may be right for you

ADVANTAGES OF COMPUTER SOFTWARE

These programs usually print checks

Balance checking account

Identify tax deductions

Provide graphs to help you analyze your financial situation

STRATEGIES TO TRACK SPENDING

Keep records simple Avoid unnecessary detail

Appoint one person in the household to record family expenditures

Set a regular time for record-keeping Getting behind can make it a challenge to catch up

STRATEGIES TO TRACK SPENDING (CONT.)

Analyze Expenditures Regularly Are all expenditures listed? Are all financial obligations being met? Is spending within your income? Are you satisfied with how your money is being

used? Are you satisfied with the amount being saved?