Tracking expenses is one thing. Analyzing and understanding these expenses is something else altogether.
I’ve been tracking my expenses since I was a freshman in college. And throughout my experience, I’ve learned a lot about how and where my money is used. Over the years, and as I’ve gone from single life to family living, I’ve relied upon certain tools and documentation to help me better analyze expenses.
Paper documents still comprise a large part of the items we use to analyze our expenses. From regular store receipts to utility bills, these items allow us to really drill down into individual aspects of our costs.
With utility bills, we can compare usage rates to billing amounts, looking for ways to decrease consumption during certain times of the year. With paper receipts, we can review product cost increases over time to find personal inflation rates, breakout individual category expenses (clothing, baby supplies, food, entertainment, etc.), and determine how sales tax rates increase our spending. This also provides us with documentation should there be product issues down the road or should we need to return a purchase.
Credit card statements
Credit card statements are a good way to get a handle on a big chunk of expenses all at once. Reviewing such statements can be a simple way to analyze larger or bulk purchases all at once.
The upside to using these statements is that it is a one-stop-shop for multiple purchases in multiple budget categories, especially for regular card users, and it can take just minutes or less to review a month’s worth of expenditures. The downside to using credit card statements is that they won’t provide the breakdown of costs that individual receipts might. For example, when going to the grocery store, you may see a bill for $78 on your credit card, but you won’t see the breakdown of what items made up that total and what they cost individually.
Lots of people use budgets, but not all of them use a budget effectively. They might map out their expected expenses as a general outline of what they expect to spend each month or year, and that is that. However, we drill down into our budgets much further, using them to analyze our expenses in detail.
Not only do we use our budget as a monthly and annual cost outline, but we let it gauge our costs throughout the year as well. As we spend, we compare our expenses to what we’ve outlined. This helps us see exactly what we’ve spent compared to what we estimated. This also acts as an expense tracker to show us where we’ve spent, and in what amounts, and it provides a reference to look back to over time.
And with these tools at our disposal, we’re able to get a better handle on our costs by being able to analyze our expenses over months, years and even decades.
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The author is not a licensed financial professional. This article is for informational purposes only and does not constitute advice of any kind. Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.