5 Tips To Track Your Monthly Expenses

Finances play a critical role in our lives. We work hard throughout the month to finally collect the well-deserved paycheck. A good chunk of our monthly earnings is spent on several expenses and loan repayments. We also try to work on our savings and investment plan dedicatedly but are often unable to contribute as much as we'd want to.By the month-end arrives, we often find ourselves cash-strapped and relying on the funds dedicated for savings waiting for the next paycheck. We can better manage the inflows and outflows by tracking the expenses to curb unnecessary spending, save more, and strengthen our finances. Here are 5 simple tips that can make expense tracking easier-

Expense tracking or budgeting is not about micromanaging your finances. When you try to control and manage the smallest of expenses, you often waste a lot of time with not much savings to show for all the effort. By categorizing your expenses, you can make the expense tracking process more efficient and effective.For instance, booking a cab to reach the office and spending a fun day with family at the mall can be clubbed under the ‘conveyance’ category. Categorizing can also help you understand the expenses that consume most part of your income.

Budgeting is one of the most effective ways to track your expenses and boost your savings. Encouraging you to spend within a pre-defined limit helps you stick to your savings plan and avoid the month-end crunch as a salaried professional. If you've been earning for some time now, you might already know about your spending habits and basic monthly expenses.Use this knowledge to draw up all the significant expense heads such as food, EMI, rent, conveyance, etc., and put a maximum limit to each of them. The limit can be set based on your historical expenses. During the month, as you’ll start approaching the limits, you’ll automatically begin to tighten the purse strings for that category to avoid over-spending.

We are so busy with our lives that it is not possible every day to sit with a pen and paper or open the Excel sheet to evaluate the daily spends. Instead, make a habit of taking stock of your finances once around the middle of the month when you are mostly done with all major expenses. Evaluate the amount of money you have in your hand and don’t include the limit available on your credit cards.It will provide you a clear picture of how much of your own money you’re left with for the remaining 15 days or so. You can manage your expenses accordingly to ensure that you don’t run out of money by the end of the month or have to rely on your savings or credit cards.

As you’ll start budgeting and categorizing your expenses, you’ll mostly find at least a few opportunities to save more. It could either be in the form of an unnecessary recurring expense or a certain expense that often ends up consuming more than the pre-defined limit.While you can do nothing much for expenses such as rent, EMIs, etc., you can find ways to save more in other departments such as food, travel, and other extra expenses. A few lifestyle changes can help reduce your monthly spending and enable you to save and invest more for a secure future.

If you’re not a pen and paper or Excel sheet person, you can maybe benefit from an expense tracking app. Some of these apps require you to manually enter your expenses, while others can automatically draw the data through the linked bank accounts and credit cards.A few apps also automatically categorize the expenses to make it easier to understand your spending habits. Around the end of the month, the app can also generate expense reports to help you track expenses and find opportunities to save more money.

A penny saved is a penny earned. While people are mostly focused on earning more in their bid to have more savings, it is worth noting that the expenses generally rise as the income increases. An excellent alternative to save more is tracking your expenses and looking for ways to minimize your monthly spending.Apart from working your way towards generating more income, dedicate some of the efforts to managing your expenses as it can help you save and invest more for the future.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.