Account statements
Bank statements have been around for decades
providing a monthly financial document that
provides a summary of your account’s activity. It breakdowns your incoming and outgoing
payments, allowing you to keep track of your finances so that you can plan for
future expenses.
Checking your statements frequently makes you more
aware of your money habits, which makes managing your accounts more hassle free
and allows you to recognise any unauthorised transactions. One of the easiest
method of checking your bank statements is through your online banking, as it
provides instant access wherever you are.
Expense tracking
apps
Similar to online banking, expense tracking apps
are a great way of keeping up to date with your expenses. Some of the best
budgeting apps which allow you to connect your bank accounts are Plum, Moneyhub and Revolut.
Using these apps while following the 50-30-20 budget rule reduces the
complicated aspect of dividing your income each month. Allowing you to instead
put 50% of your income towards your needs, 30% towards your wants and 20%
towards your savings.
Other forms of expense tracking can include budget
spreadsheets for those who prefer a more hands on approach and are particular
about how their financial data is stored. Spreadsheets are a good way to
analyse your money, as you are in charge of inputting all the necessary data.
This gives you the opportunity to reflect as you categorise your expenses.
Categorising your
expenses
Grouping your different expenses is key when trying
to track where most of your money goes. It is helpful as it keeps your account
organised making it easier to make bill payments on time, save for something
significant such as a house or car, and prepare for emergencies that may come
up. One of the first steps in categorising your expenses you can take is
splitting your expenses into two categories.
Fixed expenses
Fixed expenses are payments that remain the same
month to month. They can be categorised as payments that are necessary for your
day-to-day life such as rent, bills, transportation, groceries etc. Being aware
of your fixed expenses allows you to form good saving habits, as you have to
budget for these transactions regularly.
Variable expenses
Variable expenses are payments that may or may not
repeat month to month, however it is still important to track these payments so
that you do not underestimate your budget. It is important to differentiate
between needs and wants when it comes to variable expenses, so that money is
not spent on unnecessarily things. In most cases, it is important to set aside
money for variable expenses such as holidays, hobbies, entertainment etc.
It is important to highlight that how you track
your monthly expenses is a personal choice. We all have bad spending habits
that we may not be aware of until we track our expenses, and when we identify
these habits we can make adjustments to do better.