Categorizing and Tracking Your Expenses

Tracking your expenses and spending is a great way to ensure you are not living beyond your means. No one wants to have their power cut off because they have to have that expensive handbag or coffee every morning. Below we will go over effective ways to categorize and track your expenses.

Needs, Wants, and Obligations

There is a significant difference between the things you need, your obligations, and things you want.

You need things such as:

  • A place to live
  • Groceries
  • Electricity

You are obligated to:

  • Pay your home or auto loan
  • Feed and clothe your children

You may want:

  • Fast food
  • Coffeehouse coffee or drinks
  • A meal out vs. cooking at home

Before setting a budget or preparing to track expenses, you must first determine your specific needs, wants, and obligations, as these vary from person to person.
Some of the things you need may include:

  • A home
  • Transportation
  • Insurance
  • Groceries
  • Electricity
  • Water

You are obligated to pay things such as:

  • Auto loan payments
  • Home loan payments
  • Credit card payments
  • Taxes

Expenses that accumulate based on things you want may include:

  • A gym membership
  • Fast food
  • Expensive coffeehouse coffee
  • Designer clothing, shoes, or bags
  • Travel

Tracking Expenses

Tracking the amount of money you are bringing in versus the amount of money you are taking out each month can help you save a tremendous amount of money if that is your goal.

Account statements:

To start, look over all of your account statements, including all checking accounts, savings accounts, and any credit cards you may own. Determining where your money is going each month is the first, and perhaps most important, step to tracking your expenses.

Create a budget:

Budgeting is not for the faint of heart, and it entails hard work and dedication to succeed. Once you have successfully determined where you are spending your money each month, you can begin grouping things you need versus those you want.

Determining necessities versus vanities will look a little different for each person; therefore, no two budgets will be the same. Begin your budget by allotting for things you need to survive and those financial obligations you have incurred. These may include items such as rent, mortgage, an auto loan note, both health and auto insurance, your electric and water bills, and groceries. It is essential to allot additional money within your necessities for those unexpected expenses, such as an emergency room visit.

Once you have laid out your necessities within your budget, you can begin allotting for your vanities. Vanities may include things such as a meal out, a coffee from your local coffeehouse, hitting a night club, or a new handbag. Allow yourself a monthly personal spending limit within your budget, so you do not feel too restricted.

Log your purchases:

Whether it be a paper report that you fill out by hand or an online application, utilizing an expense report to log your purchases will help ensure you do not exceed your budgeted monthly amount.

You can download many online applications straight to your phone for ease of tracking, or you can utilize things like spreadsheets or a simple notebook if you would rather the simplicity of monitoring.

Identify necessary changes:

After a month has passed of budgeting and expense tracking, you will begin to see your spending habits and be able to tell if your habits are healthy or not. Once you have determined areas where change may be necessary, you can easily make those adjustments in your spending to ensure a better financial future for yourself and your family.


Overall, categorizing and tracking your monthly expenses and spending will not only benefit you in the short term but the long term as well. Tracking expenses can seem quite daunting when you are first starting, but if you can stick with it, you will learn so much more about the things you need than those you may think you need.

There are many ways to categorize your monthly necessities and even more ways to track your spending. Whether you choose to go old school and track things by hand, keep your receipts to enter expenses into a spreadsheet, or utilize an online application for convenient expense tracking, you are sure to save and cut down on your monthly payments by doing so.

Information presented in the Northwest Financial Wellness Center is provided for educational purposes only and is not related to actual Northwest products or services. Northwest makes no representations as to the accuracy, completeness or specific suitability of any information presented. Information provided should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. Northwest recommends you consult a professional for any specific guidance you are seeking.