Tracking expenses is an important step in getting out of debt. Keep in mind that you don’t have to track expenses for forever — although you might find it so beneficial that you end up wanting to — but it IS an extremely useful tool.
Start by recording every single thing you buy, no matter how small. (Even a 1 cent gumball counts.) This may seem extreme, but chances are you’ll be surprised at how much of your money is spent on the little things — and the only way to find out for sure is to track every single expense.
What I did was entered all of my non-cash transactions into Quicken each day, and wrote anything I bought using cash down in my planner. (Quicken is nice because you can categorize things, which will make step three toward getting out of debt easier.) I began making categories and sub-categories (for example, things like Housing: Mortgage, Housing: Maintenance, Entertainment, Medical: Doctors, etc.) But you can do this using a paper notebook or a spreadsheet.
Ideally you should do this for a month to get a good sense of what your regular expenses are. If you get impatient (like I did) and have some of your old financial records, you can always go back through them and see what your previous month’s expenses were. BUT — remember, if you do that, you won’t be seeing ALL of the money you spent. And it’s really important to find out where it all went.
Once you’ve tracked your expenses for a while (or gone back through your past expenditures), you’ll be ready to use what you’ve learned to find areas where you can cut back or get better deals. That will give you more money to send toward your debt, and help you to get out of debt faster.
I know this seems like a lot of work, but it’s important to get a good foundation for your finances — and that’s the most important part of a serious get-out-of-debt plan.
