If you find yourself living paycheck to paycheck or are not sure where your money is going, then it’s time to audit household spending. Reviewing your outflow provides you with a ton of valuable information, making it easier to get control of your budget.
There are several ways to audit your household spending, each with different benefits and drawbacks. If you’re ready to start, here are four approaches that might work for you.
1. Grab Bank Statements to Audit Household Spending
This process is entirely manual, so it can take some time to complete. But, your bank statements likely hold all of the information you need, making it a solid option.
Ideally, you’ll want to review at least six months’ worth of information. You’ll need to print out your bank statements (unless you have PDF editing software) and a method for coding your costs. One fairly simple approach is to get a variety of highlighters. This allows you to assign a color to each expense category.
Review each statement line by line, assigning every household charge to a category. Total the amount associated with each color. Repeat the process for your remaining statements, then calculate an average.
2. Try Helpful Apps
There are a wide variety of smartphone apps that can help you audit your spending. One popular app is Mint, though there are a lot of reputable options from which to choose.
These apps work by downloading information from your bank (the same data that appears on your statements) and providing a toolset that lets you categorize your expenses.
The nice thing about going with an app is you can set up rules that dictate the category expenses should be assigned to automatically. For example, you can have every charge from a specific gas station placed in an auto category. This removes some of the work, making it easier than a full manual review.
As a bonus, these apps will help you create a budget that aligns with your spending goals. Plus, you can track how much you spend in each category in near real-time. What a great way to audit household spending.
However, some people don’t like the idea of providing an app with access to their banking details, even if it says it’s secure. In those cases, a manual approach is likely a better choice.
3. Use Comprehensive Software
If you operate a business or are self-employed, you might want more comprehensive software, like a version of QuickBooks. You’ll get more category options with these, and it’s easier to separate your household and business expenses.
Like the apps, you can connect straight to your bank account to download spending data. You can also add transactions manually, which can be helpful if you deal in cash – something often lost when you audit household spending.
Typically, these programs have an app component as well, so you can use your smartphone for tracking too.
4. Track Your Receipts
If you don’t need to audit all of your expenses, then simply tracking your receipts can work. Usually, the easiest approach is to gather your receipts and record the information in a spreadsheet, either on a daily or weekly basis.
However, unless you already keep your receipts, this might not be ideal for a retroactive audit. But, if your goal is to watch your spending going forward, it is a suitable option.
Ultimately, which approach is right for you depends on your personal situation, goals, and comfort with technology. None of them are inherently better than the others (though some require more work), so pick one and give it a try today.
Looking for more great articles from Blonde & Balanced? Here are a few to get you started:
- 5 Tips for Meal Planning on a Budget
- How to Quit Spending More Than You Make
- Beginning of the Month Budget Items
