A guide to expense tracking

From your monthly housing expenses to afternoon coffee at your favourite local coffee shop, do you know what you spend every pound on? With so much going on in daily life, you may want to consider using a personal expense tracker.

This article includes tips, suggestions and general information. We recommend that you always do your own research and consider getting independent tax, financial and legal advice before making any important decision.

An expense tracker can be a useful tool to help you to keep an eye on your finances on a daily, weekly, or monthly basis. It may also help you stick to your budget and provide visibility into where your money goes every time a paycheque hits your bank account.

Tracking expenses can help you better manage and save your money. This guide explores some of the different ways to track spending and maintain an expense tracker.

How do expense trackers work?

Expense trackers can help to sort different kinds of expenses into different categories and be an efficient way to track spending regularly. They can potentially highlight unnecessary spending, showing you where there could be room to cut back or save, and help you identify how much you need to set aside on essential items such as your mortgage, utility bills, and insurance.

As you build your expense tracker, you could aim to allocate about half of your monthly take-home pay toward necessities, which may include expenses like your rent. These tend to be fixed amounts that don't change monthly.

Discretionary charges — such as how much you spend on food or entertainment — may vary and are usually filed under wants, not needs. Best practice is to set aside around 30% of your budget for items like travel or entertainment that you may enjoy but do not need. You could also include a third category for paying off debts, including credit cards or student loans, and building up your savings and retirement accounts.

Below are some examples of relevant categories you may want to include in an expense tracker:

  • Utilities, including phone and internet services, water, and electricity
  • Rent
  • Home insurance
  • Mortgage
  • Property taxes and fees
  • Groceries
  • Essential clothing and toiletries
  • Transportation, including vehicle maintenance and insurance
  • Childcare
  • Prescription medication
  • Life insurance
  • Student loans
  • Child support
  • Entertainment
  • Self-care
  • Travel
  • Recurring subscriptions, including streaming services
  • Restaurants and food
  • Gym or club memberships
  • Non-essential shopping
  • Credit card payments
  • Savings, retirement, and emergency fund contributions
  • Charity donations

Types of expense trackers

There are different types of expense trackers. Some can help to track monthly expenses, while others can help with daily expense tracking. Ultimately, there are a number of different ways to track spending. Here are some examples:

Spreadsheets and templates

Keeping track of expenses doesn't have to be a tedious process. That said, a potential benefit of using tools such as spreadsheets and templates to track spending is that they often come at a low cost or no additional expense.

Spreadsheets can normally be customised to your specific personal and financial needs and are often simple enough to build out on your own. However, it's important to stay disciplined enough to maintain the spreadsheets by regularly logging all expenses and income. Without proper documentation, your expense sheet may not provide an accurate picture of your financial situation.

Apps and online

Many digital budgeting tools and software programs aim to help make regular expense tracking a convenient and seamless process. Some online apps offer specialised features in addition to tracking spending online, which could come in handy if you run a small business or have a side hustle.

It is possible for expense tracking apps and online options to help an individual track their finances and stay in control. A common benefit of using an expense tracking app is that it can typically be done on the go. Digital budgeting tools could come with costs, so it's important to consider this before making a decision to use one.

Potential benefits of expense trackers

If you track expenses regularly, you could gain a better understanding into how much money you spend each day, week, and month. Tracking spending can also help to provide a detailed look at where you could potentially cut back and save money.

With every expense recorded in one place, you may realise you’re overspending in certain categories. For instance, take streaming services: £9.99 doesn’t sound like much for a single subscription, but it can add up if you’re subscribed to several different platforms. You also may discover recurring charges you forgot to cancel, which can quickly add up, too.

Another potential benefit is automated reminders. If an expense tracker has this feature, it could remind the user when their bills are due and help them make payments on time.

Taxes

Using an expense tracker could help an individual keep tabs on things all in one place, such as mileage, rent, or utility bills and may help them identify possible tax deductions and reduce their taxable income.

If an individual’s situation changes, it’s important for them to update their personal expense tracker so that it's an accurate reflection of their situation.

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