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From the Mailbag: Question On How to Track Spending and Pay For Current Expenses

January 10, 2011 · 79 comments

in From the Mailbag, Personal Finance

I recently received an email from Holly, who has a some questions about tracking spending, and covering expenses as they occur:

I’m atempting to really focus on budgeting better this  year.  I have not really successfully tried a great method on paper/computer — alot of it has just been in my head over the years.  (which is not the best method of course!)

I have several worksheets for monthly budgeting that I’m going to try. The place I get stuck is what next, after  I’ve gotten the basic budget for the month, then how do I do the nitty, gritty of tracking all the spending and reconciling it all together at the end of the month?   It seems like it could be so tedious.

I’m also at a bad place where I’m currently using most of my current month income to pay last months bills (i.e. I put it all on my credit card and then pay off the credit card the next month.  I do however pay my bill completely off, so I’m not in cc debt)  I would like to get to a place where I am using the current month’s money to  buy current.  (if that makes sense)

Any advice you have would be great.

First off, let me congratulate you on paying your credit card balance in full every month.  That in itself is a great accomplishment.

OK, so let’s break down your questions one-by-one.  I am not addressing budgeting as it sounds like you have a plan for that.

  1. Tracking Spending. One of the best tips I can offer to reduce the tediousness of tracking spending is to reduce the amount of transactions you have!  That being said, I asked some of my PF blogging friends which software they prefer so I could get a variety of opinions.  The most common responses I got were Mint.com if you want to track online (it’s free), or to use a software program like Quicken.  It depends on what you want to do with the information.  If you are just looking to categorize your spending, you could do it yourself in an Excel spreadsheet.  Whatever you decide, I would recommend updating your information daily.  I think that recording expenses frequently will make you feel the pain of spending more since you are reminding yourself every single day what you are spending your money on.  Plus, it would be quite a chore if you recorded all your expenses at the end of the month.  You might find yourself rushing through inputting the data instead of truly ‘listening’ to the information if you do it all at once.  Remember, you are not recording just for the sake of recording.  You are tracking expenses so you can learn something.   The software you use is not what is important.  You could scratch your expenditures on a rock if you wanted. What matters is how you interpret the data, what you learn from the data, and the plan that arises from the data.  You can have the fanciest software in the world at your disposal.  If you just mechanically enter your expenses and walk away, your financial situation will not improve one bit, even though you are ‘working hard’ at tracking your spending.
  2. Paying ‘behind’. I do not think you are alone in that you are paying for your spending from last month with this month’s paycheck.  Some people avoid this issues by paying for everything with cash.  That way, they will not make any purchases that they cannot pay for that minute.   However, you are paying your credit card bill in full each month, and hopefully getting some sort of cash back or reward points for using your credit card.  (Side note:  do not ever use a credit card with an annual fee.  There are plenty of  ‘free’ cards that offer awesome rewards.)  If you were not putting your expenses on your credit card, would you be able to pay for your purchases with cash?  Or do you have a very small buffer in your checking account either because you plain do not have the money, or you don’t want your money to sit in a non-interest bearing account?  If you are using your credit card to only buy pure necessities, then keep using that card.  However, if you think you might be picking up extras off the shelf  because you don’t have to worry about having the cash in your wallet, then you might want to consider going to an all-cash system.

My overall advice would be this:  Track your spending as it happens, and really think about the expenses you have.  Even involve a friend if you feel that will make you more accountable.  Think of a friend that would shake their head if you told them you spent a hundred dollars on another pair of boots instead of one that would say “Sweet, can I borrow them?”.   Is there a friend that might want to start tracking their spending too?   You could make it  a competition to see who can save the most, or whatever, and have celebrations for success!   Anyway, hopefully tracking the spending will stop you from spending somewhat.  Keep that extra money you gain each month in your checking account until you have enough to cover the next month’s expenses.  It may take awhile, but hopefully each month you will be motivated to make that buffer greater and greater until you finally achieve that goal.

Once the goal of saving a month’s worth of expenses is accomplished, think of a new goal and put your savings toward that.  There are plenty of online savings accounts you can open where you state a goal you have in mind (like vacation), and you can deposit money into that account at any time.  (I use Smarty Pig for this purpose.)  Come up with goals for saving so you always have something in the back of your mind that you want to accomplish with your money, instead of spending it on things you see day-to-day at the store without even noticing.  It is so rewarding when you see those savings balances increase each month.  Or, if you find it more motivating, deposit money in the account each week.  Whatever makes you happy.

However, if you are already spending the bare bones amount each month, then all you can really do if you want that buffer of not ‘paying behind’ is to put a sum of money in your checking account (if you have it saved somewhere) to give you that peace of mind of having enough to cover your current month’s bills.  Just don’t use it as a license to overspend.

Regardless of your how much you do or don’t have saved, here are some money saving tips you can use to try to make each paycheck last a little longer:

  1. Be careful at the grocery store.  Most things go on sale at some point.  Buy items when they are on sale and stock up on enough to hold you over until the next sale.  Yes, that does mean that some weeks your grocery bill may be higher, but your food will last you much longer.  Never pay full price for vitamins or toiletries as CVS has fantastic sales on these items every single week.  For example, I rarely pay more than 50 cents for a tube of Crest toothpaste.  Get to know what is a good price for staple items and take advantage when you can get a mega-deal.  Buy fruit that is in-season, as the cost of winter produce can really affect your grocery bill.
  2. Plan your meals ahead of time, and base at least some of them on what is on sale at the grocery store.   This will hopefully keep you from eating out, and will most likely be healthier for your diet.
  3. Many people hate to do this, but clipping coupons can be very effective, especially when they are combined with store sales.  Regardless, do NOT enter Kohl’s, Bed Bath and Beyond, etc without a coupon in hand.  If you find yourself at Kohl’s and you don’t have the coupon, tell them you left it at home and quite often they will give you the 15% off anyway (assuming you have a Kohl’s charge card).
  4. Eliminate empty calories from your diet.  They harm your body and your pocketbook.
  5. Since gas has gotten quite expensive, combine errands to reduce the extra miles put on your car and the amount of money wasted on gas.
  6. If you have a programmable thermostat, read the instructions and use it.  If you don’t have one, install one.

It sounds like you are on a great path toward gaining some financial security.  You are trying to put a plan in place, and really want to evaluate your spending.  You already do not have credit card debt, which really puts you ahead of the game.  (Side note: If people do have debt, it is good to use a debt snowball spreadsheet or something to keep a close eye on debt elimination progress and goals.  Also, know where your credit score falls in the FICO credit score range and make sure you clear up any inaccuracies on your credit report.)  Now, I think it would be great if you set some attainable, quantifiable financial goals and really worked toward them.

I would love if you checked back in and let us know how you are doing.  Feel free to email any further questions, and hopefully this post addressed the concerns you had.

Readers, what advice would you give to Holly?

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{ 24 comments… read them below or add one }

101 Centavos January 10, 2011 at 7:06 am

It sounds like Holly is on the right track, at least thinking about budgeting and not carrying any CC debt. Tracking expenses may sound overwhelming, but like eating an elephant (one bite at a time), you have to start somewhere. Try saving *all* receipts, even cash ones. Then, think about the categories you want to start with. Save all receipts for one month in a separate envelope. I use a simple spreadsheet, which I’ll be glad to share a template if your reader, and for me it’s better than specific software packages.


Kris January 10, 2011 at 11:08 am

101- have you ever eaten an elephant? I do love elephant ears…

One of my goals for this year is to track spending better, and I have started. Saving the receipts is a good idea too for reference, especially for those trips to the store where you buy many things.

Feel free to share your spreadsheet! Thanks Andrew!


101 Centavos January 11, 2011 at 8:57 pm

A friend once commented that if you have to eat an elephant, start with the rear end first. That way, the worst is behind you (!). What a smart-ass.


First Gen American January 10, 2011 at 7:17 am

What really helped me is asking myself the question “Can I delay this purchase or live without it for a while.” I was amazed at how much stuff I pulled out of my shopping cart that way. When I wanted to buckle down, I also made a hobby of selling my extra stuff instead of donating it. It did really add up.


Kris January 10, 2011 at 11:06 am

Sandy- Selling extra stuff is a great way to get some extra money. (People just have to make sure they pack their items well! 🙂 )

I think a lot depends on what type of shopper you are. My one ‘splurge’ in life is decent food, and I have a hard time not spending on produce (in season) and good meat. However, I am sure there are still some items I could pull out of my cart if I really thought about it. I am going to try that next time I shop. Or, maybe I will do it before I put it in the cart so I don’t create a pile of stuff at the checkout!


Nicole January 10, 2011 at 8:42 am

re: the credit card… we keep one month’s expenses in savings just for that reason (and still did even when we were paying off DH’s student loans in grad school).

You never want to be in a situation in which you’re in trouble if your employer has a bill processing error and doesn’t get paychecks out on time.


Kris January 10, 2011 at 11:03 am

Nicole, that is a great plan, and I think that is where Holly is hoping to get to. Hopefully through tracking spending and such she will be able to get that money accumulated as a ‘mini emergency fund’.


The Biz of Life January 10, 2011 at 8:52 am


You offer some great advice. Budgeting can be very tedious and time consuming if you spending down to the penny. One way to lessen the pain is to skim what you want to save each month right off the top and put it somewhere you can’t get to very easily– Pay yourself first. What is left over is what you have to spend for the month, which means you will have to sacrifice a bit and cut back on non-essentials.


Kris January 10, 2011 at 11:03 am

I agree that paying yourself first can be a great way to save. But you have to make sure you have enough to cover the high interest debt first (in my opinion).

I have often wondered if I would save a lot of money by not using my credit card for anything other than gas and thing I cannot control much. (my cell phone bill and some other monthly bills are on my credit card.) I love my cash rewards, but would I be spending less throughout the year if I didn’t have the credit card so easily accessible? Would I take the family to Steak in Shake if I had to go to the ATM first?


Moneycone January 10, 2011 at 8:59 am

Excellent advice Kris!

Also look for expenses that are recurring in nature and see if you can eliminate or downgrade these.

Cellphone – if you are not using that many minutes, can you downgrade or switch to pay-as-you-go prepaid?
Landline – if you have good cellphone reception at home, do you need a landline?
Cable – If you don’t spend too much time in front of the TV, you may be able to downgrade service or move to over-the-air reception (free!)
Work lunch – If you eat out, consider bringing food from home
Auto – Consider walking, biking, public transportation, car pool, for work if it is feasible of course.

For coupons, even if you don’t have one, check sites like retailmenot to print out one.

Hope these additional tips help!


Kris January 10, 2011 at 11:01 am

Great ideas MoneyCone! I love the internet for printing off coupons. Over Christmas I need coupons for Michaels and I could print off as many as I wanted!

You are so right about the eating out for lunch. Not only is it expensive, but bad for you too!


Jacq @ Single Mom Rich Mom January 10, 2011 at 11:05 am

It sounds like she needs to get ahead of the 8-ball and not behind. You’ve got great ongoing advice, but for some quick results I’d take a crack at one no-spend (other than necessities) month, maybe buddy up with a friend to do it since it’s kind of fun that way. I think there’s also sites around where you can go on a forum and do it with other people. I’ve seen it anyway, can’t recall where.


Kris January 10, 2011 at 11:28 am

Jacq- I agree, getting friends involved is a great idea, and who couldn’t stand to watch their money for a month? She is somewhat behind the 8 ball, but I wonder if she has money saved in other areas and not in her checking account. Like I said, it is great that she can pay her credit card in full every month. However, some drastic short-term saving could really get her where she wants to be. She may just find there are many things she really can do without and can result in savings in the long term.


Roshawn @ Watson Inc January 10, 2011 at 12:39 pm

Very great questions and answers. It can definitely be tedious. The info tracking and budgeting provides is prices.

We do avoid paying ‘behind’ by paying cash. I wasn’t expecting the empty calories advice, but that’s so true.

Cheers, and it sounds like you (Holly) are off to a great start!


Kris January 10, 2011 at 9:47 pm

Roshawn, do you think you would be tempted to buy more if you used a credit card? I am thinking of making a change, even though we pay it off every month and have enough to cover current month’s expenses.


Lola January 10, 2011 at 3:51 pm

Great advice on all counts!

I will just add that I really love Quicken and have used it for years and years. The Reports feature is really convenient for pulling up all sorts of customized looks at your spending, and there’s a budget tool as well. You can be very specific in your transaction Memo line, which is great for an archive search for things like car repairs, doctor’s visits, when you bought a specific item, etc. I’m not familiar with other financial software, but I would imagine they offer the same features. I’ll have to look at Mint sometime and see what they offer for free.

It’s a good time of year to buy financial software, too, because you can usually buy tax preparation software and financial software together and get a nice rebate.


Kris January 10, 2011 at 10:14 pm

I am going to look into Quicken myself just to poke around. I used it a few years ago for investments, but that was it. I already bought my Turbo Tax unfortunately, but I believe I have an old version around. Good suggestion on combining the tax and financial software purchase!


LifeAndMyFinances January 10, 2011 at 5:02 pm

Solid advice! I just started using Mint.com and it has been great! I admit that it is still a bit tedious to place each transaction into it’s proper category, but that’s not all bad either. It forces you to understand how to label each expense. Plus, you get to experience each transaction as it happens.

Tracking your expenses every single day is also good advice for those that are just starting to budget. That way, you don’t have to take a chunk out of every weekend trying to reconcile it. Five minutes each day doesn’t seem nearly as daunting.

I would also make sure that there was an incentive to the budget. If you hit your budget number, treat yourself with something (it’s built into the budget of course). If you miss your budget numbers, make sure to delay your gratification.


Kris January 10, 2011 at 10:18 pm

LAMF- I agree, little celebrations can be a great thing, and very motivating. It feels good to celebrate, but you are right, you gotta have consequences too.

I think half the battle of budgeting/tracking expenses is figuring out a plan that works for you, and that definitely takes some time.


Deidre @ TransFormX January 10, 2011 at 5:26 pm

Kris, as usual you offer great advice. I jotted down some to put on my sticky notes for myself!

The one thing I would add is this: Make the intention that as you save your receipts and enter your expenses that you will not feel guilty or yell at yourself about what you have spent so far. Meaning, sometimes people prograstinate because they are afraid that the situation will be worse than it really is.

Years ago I did not want to track my spending for this reason. I thought I would feel so guilty if I saw in black and white that I had messed it all up. Of course, once I sat down and accounted for each penny I could see where I had money to spare going forward. As for the areas I messed up in, well that’s spilt milk and all I could do is go forward with this new information.

Use your new knowledge to empower yourself and amazing things will happen!


Kris January 10, 2011 at 10:26 pm

Deidre, that is a great point. Just like not wanting to step on the scale or anything else. You have to accept where you are and at that point forward, make your changes. You do have to let go of the guilt and move on. However, once you do come up with a plan of attack, you do have to hold yourself accountable. I think the 80/20 rule is fine, because if you don’t allow yourself for some setbacks, I think you are setting yourself up for failure.

Thanks for sharing your story. I can see where ‘facing the music’ might make someone hesitant to start recording expenses.


retirebyforty January 10, 2011 at 6:19 pm

Great advice. Holly needs to cut expense and the best way to do that is to see where the money went. Mint is good at tracking credit card expense, but not useful at all for tracking cash expense.


Kris January 10, 2011 at 10:28 pm

RB40- great info about Mint, I didn’t know they were lacking in the area of cash-tracking! I am also a little leery of having all my financial info online. But that is probably just me…


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