What are the Best Tips for Tracking Expenses?

A wide variety of tools for tracking expenses are available and people may need to do some experimenting to find a method that works for their needs. Being willing to try several methods, and having access to trial versions of software tools, is very helpful. People should also consider why they are tracking expenses, as this can help them find the best way to handle their financial record keeping. Tools designed specifically for taxes, for example, may work differently from those intended to help people with budgeting.

People can track expenses using accounting software, including a variety of integrated products that can do things like retrieving data from bank accounts. They can also manage their expenses manually, either using notation fields in a checkbook or account log, or keeping a ledger of expenses. Some people find a middle ground, using a tool like a computer spreadsheet for managing expenses so they can customize the layout and fields.

Some things to think about when selecting a method for tracking expenses include what kinds of expenses are being tracked, why, and how the information will be used. Keeping track of household versus business expenses may involve different needs, for instance. A student might be tracking expenses to submit accounting to a trust fund for reimbursement, while an independent contractor might want to track expenses for the purpose of determining tax deductions at the end of the year.

Generally, it is advisable to track expenses as they are incurred or at regular intervals such as weekly, rather than intermittently backtracking and having to handle large volumes of data. For people who have trouble with this, a software program that communicates with bank accounts can be helpful, as all financial activity on those accounts will be instantly imported and people will be prompted to enter information, such as categorizing a given financial activity. For people who need to keep receipts, having an accompanying system for filing and organizing receipts is important.

When people are tracking expenses for a specific purpose, they may want to talk to an accountant about their options and the best way to keep track of their expenses. This will prevent them from having to do the work over again later; for instance, tax deductions are broken up into distinct categories and knowing what those categories are and what fits in them will allow people to classify expenses correctly the first time. Likewise, people tracking expenses to satisfy the terms of an agreement, such as students accountable to their parents or employees tracking expenses for an employer, should talk with the other party about what is expected to develop a mutually satisfactory system. There may be legal requirements for others; a person administering a trust fund, for instance, needs to meet strict reporting and filing requirements to account for how the fund is used.