How to Track Your Income and Expenses | Stop Living Paycheck-to-Paycheck

It can be difficult and stressful to track your income and expenses. 

But, the first step to understanding your financial situation is knowing how much money you’re earning and how much money you’re spending.

It’s basically like herding cats.

And, the cats are all of the purchases you’ve made and money you’ve received over a certain period.

Essentially, its data collection. No one likes data collection. 

You might like data analysis. 

That’s the part where you get to see how much money you’re earning and how much money you’re spending.

Well actually, you might not like it if you’re worried about spending too much.

If this is your first time figuring out your finances, don’t worry too much. 

We get it. 

We used to just ignore our spending as long as there was money in the bank.

And, sometimes when there wasn’t. 

We didn’t want to face the realization that we were spending too much money on all the wrong things.

But, it’s the first step is knowing how much damage you’re doing. 

Also, you’re probably not doing as much damage as you think you are to your finances.

And, if you are, the next step is changing those spending habits. 

It’s all about changing the way that you think about your money. 

To change how you think about your money, you must first know how your money is moving.

So, here are some of the ways to track your income and expenses:

• Saving receipts and using good ole paper and pen
• Using a website or app to aggregate transactions
• Using a digital spreadsheet
• Pulling transactions from bank and other financial accounts

Typically, you’ll use a combination of these different ways depending on your preferences and goals. 

There’s two steps to tracking your expenses and income:

1. Collecting all of the transactions (receipts, bank statements, etc.)
2. Inputting data (spreadsheets, apps, pen and paper, etc.)

For example, we pull transactions from a website/app that’s linked to our financial accounts and put them into our own custom-built spreadsheet. 

Each of the different ways has pros and cons. 

Let’s go through them. 

Saving Receipts and Writing Down Transactions

Advantages:

When you save your receipts and write down all of your transactions you’ll become super aware of all your spending. 

Of all the different methods, this method will result in the most awareness about your spending because you’ll be spending a lot of time writing down transactions. 

You’ll also have the most detailed information on your transactions. 

With the other methods, you’ll be going back in the past and trying to remember what some transactions were related to based on transaction information from the bank account or credit card. 

The information can sometimes be confusing or incomplete.

Saving receipts and writing down transactions also has an advantage when it comes to cash transactions.

Saving receipts for your cash transactions will allow you to easily categorize the expenses and have detailed information of every transaction. 

Disadvantages: 

You’re going to break your hand writing down all of those transactions!

Saving receipts and writing down all of your transactions takes a lot work and a lot of time. 

You’ll also have to work on your transactions more often. 

Or else, you’ll be spending all day going through all of your transactions. 

Rather than doing the work to put all of the data together once a month or quarter, it may be closer to once a week or every few days.

You can also lose receipts which increases the potential for not having all of your transactions. 

When you’re saving something physical like receipts you have to put a system into place for saving those receipts. 

It’s just a lot of time that you might not want to waste on tracking your income and expenses. 

Pulling Transactions from Bank and Other Financial Accounts

Advantages:

Let’s get digital. 

Pulling your transactions from your financial accounts makes it easy to quickly pull all of your transactions that don’t involve cash. 

If you pull cash out of your bank accounts, you also have a record of those withdrawals.

Your financial accounts typically will make it easy to download all of your transactions into a spreadsheet.  

Disadvantages:

It still takes time to go through all of the financial accounts to pull those transactions. 

Additionally, you have to figure out where you’re going to put all the data whether it be in a physical paper or a digital spreadsheet.

You’ll also need to go through all of the transactions to label them. 

Sometimes, the transaction descriptions can be very confusing which can make it difficult to categorize or even know what transaction is for a purchase.

Using a Website or App to Aggregate Transactions

Advantages:

When bringing all of your income and expense data into one web-based program you’ll likely spend the least amount of time working on the transactions. 

Other than when you spend some time linking all of your financial accounts, the website or app will pull together all of your transactions, leaving you with extra time.

Additionally, platforms like Mint and Personal Capital have built in programs for categorizing transactions and the ability to create budgets and other financial goals. 

If you’re using a monthly timeframe, you might not even need to do much else to track your income and expenses. 

Disadvantages:

Although you’ll have extra time due to a computer program doing a lot of the work for you, it will probably lead to less awareness of your income and expenses.

That just means you’ll need to create a way to make sure that you’re looking at your spending and earning on a consistent basis.

While websites offer additional capabilities like building a budget from your transactions or categorizing and tracking transactions, there is a lack of flexibility with the features.

For example, on some websites tracking is only done on a monthly basis. 

This makes it difficult if you want to have a different timeframe for tracking your income and expenses.

Additionally, due to a computer program (not a human) running through your transactions, there are often mislabeling of transactions. 

Like a purchase at a restaurant being categorized as a clothing purchase.

It means that you’ll have to spend time checking transactions for correct categories.

There is also the cyber security risk exposure for your financial accounts. 

Most websites understand the value of the data they are aggregating and take great lengths to protect your information. 

But, it’s another potential way for someone with malicious intent to get a hold of your information. 

Think of your personal information as the treasure in a castle. 

Each time you build a door or window on the castle, another way is created for someone to get into the castle. 

When you share your information with another entity you’re effectively building a door. 

Now, that door can be super protected (we used these websites) but it is a door nonetheless. 

Using a Digital Spreadsheet

Advantages:

If you want to put your transactions into a computer program but not something like a web or app you’ll have to use a spreadsheet. 

That means using a spreadsheet in a program like Microsoft Excel, Apple’s Numbers, or maybe Google Sheets. 

With a digital spreadsheet your don’t have to write anything down. 

What’s great is you can still save receipts and manually input them into the spreadsheet or you can pull from your financial accounts and import them into the spreadsheet. 

You can also build the spreadsheet however you want, allowing you additional flexibility for your unique situation. 

Disadvantages:

Unfortunately, you might feel overwhelmed and not know where to start when first opening the spreadsheet program. 

You’ll have to spend some time creating your own model and system to track all of your income and expenses. 

You can also find some templates on the internet to speed up the process but you might have to alter those too so that you can match your unique situation. 

And, with creating your own or downloading a template, there is the potential for errors that could wreak havoc on your tracking. 

Final Thoughts

It’s all about building a system.

When you start down the path of taking control of your finances, you’ll probably feel even more overwhelmed. 

But, once you’ve created your method for how you track your income and expenses, you’ll relieve some of that stress and anxiety.

You might not like how you’re spending your money but you’ll know where you’re spending it.

We hope that will instill some power in you to take the next step towards financial security and your financial goals.