[Budget Plan: Part 2] Where's My Money?

Despite my conscious efforts to save money and spend less than I usually do, sometimes I still feel like I don't know where my money is going; like there are some expenses that are not accounted for. This can be frustrating, especially when I'm trying to stick to a strict budget plan. The solution to this is simple but difficult: Track your money down!

STEP TWO: Keep Track of Income and Expenses

After establishing clear and SMART financial goals, the next step is to know exactly how much money we have to work with and where that money is actually going. 

FIRST: List ALL your regular income sources and the amounts. This includes the monthly wage/salary, pension, child tax benefits, spousal support, disability checks, child support etc. Any and every source of income you get at a regular (monthly or bimonthly) basis. 

SECOND: Record your spending. I emphasize: you have to write everything down. Expenses include everything you pay for; everything that comes out of your bank account (or your wallet). That means that aside from the groceries, utility bills, phone bills, rent/ mortgage, you will also have to account for debt/ credit card payments, life insurance, money you put away into tax-free savings, regular savings account/s, RSP contributions etc.

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Tracking our expenses down and knowing exactly how we are spending our hard-earned money is a crucial starting point in making a budget--and eventually, gaining greater control of our finances. 

TIP: If your expenses don't add up, look back and review them. Did you forget the dollar and few cents you paid for coffee or the change you dropped into a donation jar? It might seem silly (almost impossible?), tracking the little expenses down, but these little expenses can add up into a more significant amount that you fail to account for.

The simplest way to get this done is with a trusty notepad (or any piece of paper, really) and a pen or pencil, then just write all the expenses down. One thing we did wrong the first couple of times we tried tracking our expenses was to try to take a shortcut. We would write down how we think we should spend out money instead of writing down how we actually spent it. Don't give in to that temptation! Just keep writing everything down and try to be as accurate as you can. If you miss a dollar here and there, that's fine. It happens.

Note: Another way to track your expenses down is through your account statements at the end of every month. Just don't forget to take note of the ATM withdrawals you make and what you're using that cash for. In my case, cash has this weird habit of just disappearing. 

TIP: Don't always have the time to write everything down? Try to keep your receipts until you have the time to sit down and sift through them. I keep an accordion file where I keep receipts (and coupons arranged by expiration months!).

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 You think jotting everything down is too impractical and old school?  There are many apps and online tools to help you keep track of your expenses. One of the better ones is Mint.com (Thanks Madison! Your previous comment urged me to finally connect my account with my bank cards! :D). With Mint, all you pretty much have to do is update your profile, add your banking info, etc. and it does all the tracking for you. There's also an app for it so you can check on your spendings (and how it compares to your budget) on the go! The only thing I don't like about it: It doesn't track money transfers, so I can't track credit card payments and savings account transfers (or at least I haven't figured that part out yet).

Any method you use is really fine. There isn't one way that works for everyone. It all boils down to your preference and what works for you. The important thing is to religiously track everything. Do this for two months or so, and see the trend in your finances. On a later step, we'll learn how to make adjustments to our expenses and create a budget that fit our lifestyle.

Keep an eye out for the next steps. How's your budget doing? I'd really love to know how everyone is keeping track and staying on top of their finances!

Disclosure: I am following the steps outlined in nomoredebts.org's Money Management Strategies. Head over to their website for more info and resources.