If you’re a regular reader here at Ringgit Oh Ringgit, you know that I share my monthly expenses every. single. month.
The reason why I prefer expense tracking rather than budgeting is simple: it just works ridiculously well for me. All I have to do is record all my expenses and suddenly my financial life is just better, more organised, data-driven.
I don’t have to stress about keeping my expenses in one particular category under a certain amount, because I know that as long as it averages out okay in the bigger picture, I’m good.
(Example: Buying groceries in bulk will increase my groceries expenses in that month but lower them in subsequent months.)
This article is how about how it works.
How my expense tracking looks like
If I put it in steps, it looks like this:
- Step 1: Make whatever purchases I need for daily life
- Step 2: Enter it in the expense-tracking app in my phone
- Step 3: Review it occasionally and make mental notes to adjust spending in the coming days/weeks/months
That’s, uh, pretty much it.
You don’t have to use an app. Some people prefer pen and paper – that’s fine too. Some people like using Excel or Google Spreadsheet. If it works, it works.
Example: Mimirello’s (free downloadable) spreadsheet. Straightforward, right? Click here to download at her website.
And here’s how @debtfreemy’s look like:
Personally I love using apps, simply because my phone is near me 24/7. The expense tracking app I use is called Money Lover (my review). I believe it costs RM29.99 now, almost double what I paid for it back in mid-2014.
You don’t have to get the same app. There are many other free and paid options. I asked around the Malaysian personal finance community, and here are some expense tracking apps they personally use:
- Buku 555
- Money Coach
- YNAB (You Need A Budget) – I heard this one is really good but it’s subscription-based
- Every Pocket
- Money Manager
- Trabee Pocket
If you’re fans of any of the above apps, let us know why you like it in the comments section. Let us know if you’re using another app too.
Making the habit of expense tracking easier
Some people told me that they tried expense tracking, but ‘fell off the wagon’, so to speak. I don’t claim to have all the solutions, but I can share how I make the whole process easier.
#1 – I’ve locked down categories that work for me
I have 13 categories.
In bold= Expenses that can’t be avoided, but I try to get the most of it when I can (example: getting reward points when paying for electricity).
In italic= Things that I pay for a better quality of life, to avoid turning bat-shit crazy and avoid being an uninteresting person in general. I don’t put a limit, but I don’t go overboard.
- Business – website maintenance, tools
- Dates/Travel – self-explanatory
- Donations & Gifts – self-explanatory
- Food – for the occasional Chatime and Rotiboy (not Groceries; I track this because it tends to correlate with weight gains)
- Groceries – Gotta eat
- Insurance & Medical – self-explanatory
- Loan Repayment – PTPTN loan paid off! Now paying ASB loan and laptop instalments
- Misc Needs – Things I need to function as an adult. Doesn’t occur frequently enough to warrant its own sub-categories. Ranges from new passport fee, sunblock lotion, home repair costs, etc
- Misc Wants – Things I want, usually when I’m weak and/or can’t resist a great deal. Stuff like new clothes, accessories, home decor, etc
- Mobile – self-explanatory
- Public Transport – My Grabs and LRTs
- Social – Gotta meet people and socialise
- Utilities & Rent – self-explanatory
These categories are personalised for me based on my spending pattern – I don’t have a car, so I don’t have Petrol/ Car Payment/ Toll/ Car Maintenance categories. Add/subtract/adjust as necessary.
If you want to check how much you spend on fashion/makeup/gaming/some-other-hobby on a monthly basis, this is a good way to find out as well. If you just want two categories: Necessary Purchases and Unnecessary Purchases, feel free to do that too.
I absolutely love the insights that come from these data – where my money goes show who I am, as a person. That itself motivates me to continue this expense tracking habit. Related read: My Total Income and Expenses in 2017.
#2 – If I forgot the amount, an estimate will do
As much as possible, I try to log those expenses immediately, but I’m no robot.
What I do is request for a receipt and keep that in my wallet to sort out later. If I don’t have that, then I’ll just log an estimate, rounded up.
Extra bonus in this method: I’ll automatically deduct expenses lost outside of my control, like if I dropped money somewhere (touch wood!), or if whatever service I’m using incur a fee I missed.
#3 – Not sweating the small details
Someone asked me how I track across different bank accounts and credit cards, and here’s the thing: I don’t. All expenses go into those 13 categories, regardless where they’re deducted from. I guess it’s easier because I intentionally limit my banking to just two major banks and three credit cards.
I also don’t include amounts deducted for investments in here. My justification: those are not ‘expenses’, those are income for future me.
#4 – Automating recurring expenses
My app has a feature to automate recurring expenses, so I don’t have to keep logging that in monthly. These include things like rent, insurance, ASB loan, laptop instalments, things like that.
This makes life a little bit easier for me.
Related read: What Subscriptions I Pay For And Why
What you can do with all the data
Lots of things! You can:
- Stop wondering where your money went! You’re effectively a detective, digging on your own shit :p
- Find out from the data what you prioritise/ value in life. Maybe you’ve been in denial about your shopping addiction, and seeing the actual amount spent is just what you need to whip your finances back into shape.
- Tweak your spending for the coming months. If you think your food spending is higher than expected, you might decide to pack your lunch to reduce that spending, at least for the next few months to bring the average down.
- Motivate yourself to be debt-free. Getting into the habit of expense tracking can be enough to deter unnecessary spending in the first place! Note: for extra extra motivation, join the #debtfree community on Facebook, Twitter and Instagram
- Quickly check when you made certain payments. Adding notes when you track expenses is incredibly useful. Like last time, my landlady wanted to know when was the last time I serviced the aircon in my rental unit. How would I remember! Thankfully I had the notes and could tell her the exact date. That particular incident saved me money – I didn’t have to service the aircon again before I move out (as per Tenancy Agreement).
- Set’money challenges’ for yourself. Challenge yourself to have no-spend days. Or ‘spend below RMxxx for Social category in X month’. Or ‘zero unnecessary spending week’. Whatever rocks your boat!
Do you do expense tracking too? What are your tips to make it into a habit? What have you found out about yourself since you started doing it? What do you find hard about it? Let us know!