Admittedly, the task of tracking your expenses can feel intimidating, especially if it is something new, which you have never done before. Nevertheless, it is a crucial step in your journey to financial freedom as it provides you with the right information and confidence you need to move forward in your financial journey.

Thankfully, there is no one-size-fits-all rule for monitoring expenses. However, there are two approaches; track as you go, or track after the fact – depending on what works best for your lifestyle. Within these two approaches, here are five different ways to track your expenses. 

The Age-Old Pencil and Paper Method.

An easy way to get started with tracking your expenses is to go the old-school way – with a pen and paper. Let’s face it, many of us still love the idea of keeping physical journals, which is why using a notebook to track expenses can be a good choice. 

If you choose to go the pencil and paper way, you can decide to track your expenses as you go, although this means you need your notepad with you at all times. Alternatively, you can keep your receipts till the end of the day then pen them down in your notebook ledger just before bed.

Pros	Con(s)
Easy to get started.	There is a high risk of missing entries as a result of lost receipts.
Encourages journaling.	One could easily forget their expenses by the end of the day if not noted immediately.

Envelope method.

Still on the traditional movement, the envelop method is another classic way to track your expense. Here, while you do not have to monitor every item you buy, you let your money do the tracking in the sense that you assign an envelope for each expense category. 

For instance, you can choose to have different envelopes for groceries, eating out, transportation, or entertainment. So whenever the money in any of these envelopes is empty, your spending stops for that category. 

This is a formidable way to track your expenses because spending in cash inspires a whole new level of responsibility, and watching that money go down can inspire creativity. For instance, if you have been taking cabs because you are always late and miss the bus, knowing that you are restricted to the money in your envelope will force you to get better at time management.

Pros	Con(s)
Great for restricting pleasurable expenses like outfit shopping, eating out, and entertainment.	Spending cash can sometimes be inconvenient.
Encourages new positive habits. For instance, if you have been taking cabs because you are always late and miss the bus, knowing that you are restricted to the money in your envelope will force you to get better at time management.

Have a separate spending account.

If you are looking for a more laissez-faire way to track your expense, having a separate spending account might just be the solution. You can choose to spend from one account or have several spending accounts for different purposes – for instance, a separate account for your rent, bills, and entertainment. 

This way, it is easy to trace how much is goes in and out of each account. 

Pros	Con(s)
Easy to get started.	Some expenses can be ambiguous, especially if using a single account for expenses.
Requires minimal effort.

Spreadsheets.

Enough with the analogue ways; let’s get digital. Thanks to the plethora of templates that spreadsheets offer these days, one can easily customize the budget and have the math done for them on the screen.

When working with spreadsheets, ensure you choose and maintain a frequency to log your budget, income and expenses, whether weekly or monthly. 

Pros	Con(s)
Variety of template options to choose from.	Not easily accessible, as you will likely need to have your computer around to input an entry.
Easy to get started and maintain.

Budgeting/ Expense tracker app.

In a world where convenience and productivity are key, a budgeting or expense app is just about the best way to track your expenses. Not only are they easily accessible because they are on your mobile phone, but they are also automated. For instance, an app like Mint.com can be linked to your bank accounts, thereby tracking and categorizing your expenses as you spend.

Unfortunately, Mint isn’t available in all countries. However, there are other great and free alternatives like Money Manager and Cost Track, making budgeting and tracking your expenses a breeze. 

Pros	Con(s)
It is convenient.	Yet to find any con as it is the best expense tracking method.
Automated and easy to sync.

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At the end of the day, tracking your expense is a crucial step towards gaining financial freedom, as even the smallest expenses can cause you to overstep your budget and ruin your financial goals. By listing the pros and cons of each method, we are hoping it makes it easy for you to choose which method best suits your lifestyle and work towards making tracking your expense a habit.

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