Create an Income and Expenses Tracker

The next step in getting control of your money is to use an income and expenses tracker. This is where you will record every single deposit or withdrawal from each account, including cash spending, bank accounts, savings and credit cards.

You will need to record which account the transaction is from, the date of transaction, where the money went to or came from (payee/payer), what category the transaction is (E.g. Utilities Bill, Leisure, Groceries, Mortgage), the amount – exactly, and the current balance. It doesn’t matter where this is recorded; you could use any note pad. There are also bookkeeping pads you could use which are available from office suppliers. You could also use an Excel spreadsheet.

If you are serious about financial freedom, you could also consider one of the many home finances software tools or on-line sites. I use Microsoft Money and recommend it.

The aim of this habit is to firstly to throw light on where your money is going. If you do decide to use the software or on-line tools, make sure there is a reports function which can give you a monthly income and expenses report. There are usually some real surprises when you start doing this.

“What – we spent how much on take-away food?”

From here, you can then focus on the real money drains. Secondly, at the end of the month you can review the transactions to see if you are overspending or are actually starting to create excess cash.

Record All Cash Transactions

Buy yourself a little pocket note book and start to record every single cash transaction; Yes that means every time you spend some cash, write it in your note pad. If you think this is too anal, I urge you to reconsider. This will not only shed light on the hidden cash pits but also you will start to change your spending habits. You will begin to question your purchases. “Will this item really be worth spending money on?”.

Weekly Financial Review

Now I’m not saying that you should fill in your Income and expenses tracker every day, weekly should be fine. It will take no more than 30 minutes normally. To form the habit, do it at the same time every week (I do mine on Saturday morning). Record all the transactions for all accounts in whatever tracking system you have.
Go through your current account statement and record the transactions in your system. Go through your credit card statements and do the same. Next go through your note pad and record each cash transaction you have made in your system. If you do this religiously every week, this will be invaluable to you, as you will start to build up a picture of your spending habits.