Master Your Finances: A Comprehensive Reporting Guide

Now that you completed the net income exercise and have an understanding of your net income for each month you can begin tracking your expenses. Tracking your expenses is a vital step toward attaining mastery over your finances. By understanding where your money goes you can help ensure balance between your net income and your spending, so that you can save what you need for the future while also reassessing where you need to put your money.

Using your net income calculated in the previous exercise, the 5 steps below will help guide you through categorizing and tracking your expenses.

By Jasmin Sethi

5 Key Steps:

    • Total all savings made during the year, including retirement contributions and non-retirement savings.

    • Total regular necessary expenses like, transportation, groceries, and medical costs.

    • Total spending on discretionary categories such as travel, dining out, entertainment, and shopping.

    • Subtract your savings, monthly expenses, and discretionary spending from your net income to ensure they align. If the number is negative, they do not align. If the number is positive then they do align.

    • In order to improve your balance and alignment you need to track where your money is going. The best way to do that is to split your discretionary expenses into particular expense categories.

    • Below is a list of useful buckets you can split your expenses into in order to track how much you spend on certain things. 

      • Car Payments

      • Transportation (Gas, bus fare, train fare, plane tickets, etc.)

      • Shopping (Misc. personal items such as clothing, electronics, utensils and more)

      • Groceries

      • Medical Expenses (Co-pays, prescriptions, therapy, etc.)

      • Fitness

      • Entertainment

      • Dining (Eating out)

      • Cash Withdrawals 

    • The accompanying worksheet can help you fill in totals for all these categories yourself. The worksheet also includes empty columns for you to add in your own categories that make sense for your own particular needs and situation. 

    • Fill in how much you spent on each category in each month. 

Click the button below to download the worksheet designed to help you track your expenses.

Key Takeaways:

  • Completing this worksheet and getting a handle on your expenses is vital for your financial health. Your spending and net income must align. Net income is the income you live on, so do not let your gross income value lull you into a false sense of security. 

Recommendations:

We recommend completing this financial review alongside your tax preparation. It will provide valuable insights into your spending habits and savings patterns. Tracking your discretionary spending and savings quarterly can help you monitor progress and make informed financial decisions.