Expense Tracking - Categorization

Hi. I'm back. OK. Just to continue about tracking your expenses which is the first step in managing your money. I'm not going to talk about budgeting because that step should come later. It is important to get the feeling first before going deeper.

For me, expense tracking is the most crucial step that nurture your discipline in managing your money. If you don't have the spirit or feel the urge to know where your money goes, then there are very few reasons you should feel compelled to manage your money.

When should you start tracking your expense? You better start now.

Firstly, you need to a big piece of paper, or a small notebook, or an Excel template, whichever suits your fancy. Start with today's spending and categorize it accordingly. Jot down, or key in where each single ringgit goes (or even cents if you are a freak like me) in it. From your karipap breakfast to your cigarettes, from your gula-gula to your toilet charge, from your tambang LRT to your goreng pisang in the evening. *If you are working in an office using a PC or laptop, tracking your expense during the working hour will make you look like a very really so hardworking staff. Hee..

And then, give each item a category. For example, your Breakfast, Lunch, goreng pisang and Dinner can be categorized as Eating or Makan-Makan. Up to you laa kawan. This should be applied to all other thing such as tambang LRT which you can categorize as Transportation.

The reason I love using Excel to track my expense is that you can use the filter function only see the exact category you wish. I've talked about the Excel template which I've used here.

Next, keep on doing this for 3 days. You can update your tracking daily or weekly but from my experience, to develop a good habit, buat hari-hari laa kawan. After 3 days you can already see how much you are spending on major categories such as your food, transportation costs and cigarettes. Keep on tracking your expenses for a month and you could have a data on the percentage of your money spent on these categories as well as other categories such as Entertainment, Sewa Rumah, Parents etc. After 3 months, you can have a very good sense of how well are you segregating your money to those categories.

This will be a very good basis, or kayu pengukur for you to allocate you money when you learn about budgeting. I've been tracking my expenses since 28th August 2011 and I could say I've got a very good data on where my money goes. If I can do it, then of course you pun boleh juga.

The next step after you have completed the first challenge of tracking your expense is to stop wasting your money. Let's talk about that some other time. Just a summary of my rantings:

• Tracking your expense will nurture the discipline in managing your money.
• Start to track your money TODAY!
• Categorize your expenses so you could know where your money goes.
• Keep on tracking until you could see a trend or know the percentage of your money spent on each category.
• Stop wasting money.

Thanks for reading.