Expense tracking

What It Means

Expense tracking is keeping a running record of what you spend, from rent and bills to a coffee or a parking meter, with the date, the amount and a category for each. Over a few weeks the record shows where money really goes, which is often different from where you'd guess it goes. That record is what a budgetBudgetA plan for a set period, usually a month, that lists the money you expect to receive and how you'll spend or save it. See more gets checked against, and it's the raw material for setting next month's numbers.

How It Sounds at Home

• "Where did all that money go this month?"
• "Log it before you forget."
• "I didn't realize coffee was costing us that much."

The Breakdown

A short example. Lena and Marcus budget $250 a month for eating out and odds and ends, and neither of them thinks they go over. For one week they each type every purchase into the same list the moment they pay.

At that pace a month runs about $455, roughly $205 more than their budget line.

Where it goes wrong. Their first try at tracking fell apart in the small places. Cash never got written down, one of them logged purchases and the other didn't, and a card charge was noted at its pending amount instead of the amount that posted. After a week of catching up from memory, the list was missing about a fifth of what they'd spent.

What to watch for

• Record a purchase the same day. A week-old memory drops the small ones first.
• Log card charges at the amount that posts, which can differ from the pending one.
• Put each purchase in a category you already budget for, so the record lines up with the plan.
• Compare the month's total with your bank statement to catch anything missing.

Good to Know

The CFPB's Your Money, Your Goals toolkit includes a free spending tracker for writing down everything you spend, and it sits beside the toolkit's bill calendarBill calendarA calendar that shows each bill on the day it's due, often next to your paydays, so you can see which paycheck has to cover which bill. See more and cash flowCash flowThe money coming in and going out over a period; positive cash flow means more came in than went out, and negative means the reverse. See more budget, so what you learn from tracking can go straight into a plan. Comparing a month of records with your budget shows which lines were set too low and which have room to spare. CheckingChecking accountA bank or credit union account for everyday money going in and out, used by debit card, checks, transfers and direct deposit. See more your list against the bank statement, the step the FDIC's Money Smart programSave More TomorrowA savings plan by Richard Thaler and Shlomo Benartzi in which you agree now to raise your retirement contribution each time you get a pay raise. See more calls reconciling, catches card purchases that never made it onto the list, though cash spending only shows up if you wrote it down.

Related Terms and Categories

• Budget

  A plan for a set period, usually a month, that lists the money you expect to receive and how you'll spend or save it.

• Budget category

  A group of similar costs, such as housing, groceries or transportation, that a budget plans and tracks together with its own amount.

• Budget variance

  The gap between what a budget planned and what actually happened, in dollars and as a percent of the plan, marked favorable or unfavorable.

• Bank reconciliation

  Checking your own record of a bank account against the bank's statement, line by line, and explaining every difference until the two balances agree.

• Variable expenses

  Regular costs whose amount changes from month to month, such as groceries, gas, utilities and eating out.

Household money and budgeting