How Do You Track Income and Expenses on a Monthly Basis?
Let’s face it; you can never fully attain success in life with a poor financial plan. True, as Alan Lakein memorably said, “Failing to Plan is planning to fail.” The most successful individuals are, without a doubt, the best financial planners. This important strategy not only gives you clarity in life but also provides meaning and direction to your financial decisions.
A good financial plan should help you track your income and expenses as well as invest and manage funds without compromising on your standard. What’s more, with monetary planning, it is possible to earn, invest, track your cash flow, prepare for emergencies, and make sound financial decisions.
In this article, we will provide you with detailed insight into how to track your income and expenses on a monthly basis to help you create a good financial plan.
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Check Your Account Statements
How often do you check your account statements? Well, a good financial planners should be aware of their spending habits. The best way to track your spending habits is to take inventory of all your accounts and credit cards.
Note that your spending will consist of variable and fixed expenses. Variable expenses are the day-to-day expenses like food, travel, and clothing. Fixed expenses, on the other hand, can include rent or mortgage, debt payment, utilities, and insurance. They are likely not to change every month.
Categorize Your Expenses
Now that you have identified your monthly spending habits, you need to categorize your expenses. Begin by grouping them into different categories. The majority of financial institutions will automatically categorize your purchase with tags such as “automotive” or “department store.”
One of the best things about categorizing your expenses is that it helps you sort your wants and needs. In doing so, you can prioritize your spending based on your budget, especially if you need to cut costs for debt repayment or savings.
Build Your Budget
Budgeting is the most critical step in financial planning. You need to put into consideration every category of your needs and wants to help you build a good budget. Consider using an app to help you track your expenditure. There is quite a wide range of budget apps that can save you time and help you build momentum with new spending habits. Besides, it is imperative to ensure you revisit your budget every few months and make adjustments where necessary.
Find a Good Budgeting App
Mint and You Need A Budget are some of the best financial planning apps that are specially designed for on-the-go cash management. These apps allow you to allocate a specific spending amount every month based on how much you are getting and what you are buying.
If you want the best results with the apps, you must be willing to fill in your purchase log including the time, and ensure you strictly stick to your budget. You can also opt for a paid app. Although it might be a bit expensive, it might be worth the cost depending on the results you get.
Identify Room for Change
Change is inevitable. Even as you track your expenses, you need to be ready to make adjustments where necessary. Lower your big fixed expenses such as vehicles and utilities or the cost of housing. They can make an impact on your budget.
Apart from that, look for additional ways to save money to give you some room to breathe.
There is no doubt that the success of your business relies on the steps you take to track your income and expenses on a monthly basis. The process can prove to be daunting, but you can always choose to work with a professional to help you achieve your financial goals in the shortest time possible.
Is there an app that tracks expenses and income?
Yes, there is quite a wide range of apps that are specially designed to help you track your monthly income and expenses. Mint is the most recommended app, especially for beginners. Other apps include Personal Capital, which is best for Investors. Expensify, on the other hand, is best for Receipt Saving, while QuickBooks Accounting is best for Small Businesses.
How can you track monthly income and expenses for small businesses?
The first step should be to open a business account with your desired bank. Choose accounting software from the wide range of options available online and connect your financial institutions. After doing so, file all your receipts and ensure you review your business expenses regularly.
What is the best way to track income and expenses for self-employed?
Ledgers are the oldest and most successful methods of tracking income and expenses. It is a fancy word for your normal standard bookkeeping. Although you can keep a record of your income and expenses in an online accounting software or spreadsheet, handwritten ledgers are the recommended option.
What are the two main methods of tracking income and expenses?
Cash and accrual are the two main methods of tracking income and expenses. In the cash method, expenses are recorded only when they are paid, while income is recorded after it has been received. There is also an alternative bookkeeping method, which is a combination of the two methods.
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