PERSONAL FINANCE: Do you ever track your expenses?

Have you ever tried to lose weight, keep fit, or maintain a healthy diet? One of the highly recommended procedures that you must undertake to achieve your goal is faithfully keeping a record of everything you eat and drink.

The road to a healthy lifestyle becomes much easier if you habitually keep a close eye on the type of food you eat, including the amount of sugar, carbohydrates, proteins, and fats you consume.

When it comes to maintaining a healthy financial lifestyle, the same philosophy applies. You must keep a record of everything you spend your money on. This involves knowing where your money goes every month and turning this knowledge into a source of financial wellness. For example, can your account for every shilling you spent in March? None the least, tracking expenses is usually easier said than done. Let’s take a look at some of the ways you can get it right:

What is your monthly net income?

This is the first thing you need to know. Personal finance coach Robert Kimani says that knowing what your monthly net income is will give you the benchmark figure with which you will contrast your expenditures. “"You must have a correct net figure that shows how your money is spent on your fixed and unfixed expenses," he says.

If you’re employed, your net income will be the amount you have after taxes and deductions such as NHIF or NSSF have been made. It might be harder to get a monthly standard figure if you are in entrepreneurship because business income is not constant. But you can get a good idea by getting the average of net income from the last few years and adjusting it on a monthly basis.

Rob Berger, a financial advisor and the author of Retire Before Mom and Dad, says that apart from your net income, you should also track your net worth. “You need to come up with a statement of your net worth. It should include a list of the assets you own and the debts you owe,” he says.

Rob also says you must not literally include every asset you own, but all debts on your statement. “Include critical financial channels such as checking and savings accounts, investment and retirement accounts, and, businesses and real estate ventures. You can track these using a spreadsheet such as the Google Sheets spreadsheet,” he says.

Web and mobile apps

There are a host of mobile phones and web financial tracking applications that you can use to track your spending. In Kenya, there are certain mobile apps that have been designed in such a way that individuals and businesses can monitor both their daily and monthly expenses. There are also apps that will give you details on where you spend your money, with whom, as well as give you added advantage such as saving calendars and programmes.

Take SpendTrack for example. This online platform will allow you to track your monthly expenses. It is subdivided into categories that allow you to examine your utilities, communication, domestic, entertainment and transport expenses. It will also track your income; from investments, rent, dividends, salary and bonuses, as well as your general assets and liabilities.

When you set out to download personal finance mobile and web applications, it is recommended that you opt for trusted app builders. For example, when downloading apps on your phone, you can start with well-known app stores such as Google Play of Apple’s App Store.

The envelope method

This method will help you track and tame your expenses. To begin with, you need to identify what your expenses are.

You’ll then need to get physical envelopes, and label each with an expense. For example, you can label the envelopes as entertainment, clothing and shoes, utilities or transport. You will then put money in each envelope according to the specific amount the expenditure written on the envelope will consume.

For example, you can put Sh5,000 in the groceries envelope and Sh6,000 in the utility bills envelope. “Your spending will stop once an envelope for a particular item runs empty. This will ensure that your money tracks itself throughout the month,” says Kimani.