What are expense trackers and how do they work?

From rent to food and everything in between, do you know what you spend every dollar on?

Expense trackers can be a helpful way to keep an eye on finances on a daily, weekly, or monthly basis. They can also be a useful tool for someone looking for ways to stick to their budget.

Read on to learn how expense trackers work, some of the types available, and the potential benefits of using them.

How do expense trackers work?

Expense trackers can help to sort different expenses into separate categories. They can be an efficient way to track spending regularly and indicate where there may be room to cut back.

Below are some examples of categories that could be included in an expense tracker:

• Utilities, including phone and internet services, water, and electricity
• Rent
• Any insurance you have
• Mortgage
• Property taxes and fees
• Groceries
• Essential clothing and toiletries
• Transportation, including vehicle maintenance and insurance
• Childcare
• Prescription medication
• Student loans
• Childcare
• Travel
• Recurring subscriptions, including streaming services
• Restaurants and food
• Gym memberships
• Credit card payments
• Savings, retirement, and emergency fund contributions

Types of expense trackers

There are different types of expense trackers. Some can help to track monthly expenses, while others can help with daily expense tracking. Ultimately, there are a number of different ways to track spending. Here are some examples:

Spreadsheets and templates

Spreadsheets and templates can be used to track spending. Some of the benefits of using these methods is that they can come at a lower cost than other options and can usually be customised based on specific needs.

However, they are often more manual than other options, so it’s important to maintain any spreadsheets and templates used to track expenses to ensure they represent an accurate picture of an individual’s financial situation.

Apps and online

Digital budgeting tools and software programs can help make regular expense tracking convenient and easy. Some online apps offer additional features, such as business expense tracking tools, which could come in handy for small business owners or individuals with side hustles.

It is possible for expense tracking apps and online options to help an individual track their finances and stay in control. A common benefit of using an expense tracking app is that it can typically be done on the go. Digital budgeting tools could come with costs, so it's important to consider this before making a decision to use one.

Some potential benefits of expense trackers

It’s useful to track expenses regularly. It can help an individual gain a better understanding of how much money they are spending each day, week, and month. Tracking spending can also help an individual to manage finances by showing them where there may be the potential to cut back or save.

For example, consider subscription services: $9.99 doesn’t sound like much for a single subscription, but it can add up if the user is also subscribed to several other different platforms. Using an expense tracker could help them realise they are making recurring payments for subscriptions they no longer use.

Another potential benefit is automated reminders. If an expense tracker has this feature, it could remind the user when their bills are due and help them make payments on time.

Taxes

Using an expense tracker could help an individual keep tabs on things all in one place, such as mileage, rent, or utility bills and may help them identify possible tax deductions and reduce their taxable income.

If an individual’s situation changes, it’s important for them to update their personal expense tracker so that it's an accurate reflection of their situation.