If you don’t know where to get started making a budget, or your current one doesn’t seem to work for you, a spending audit is a great way to get the right numbers and make a plan that works for you. Because whether you deliberately ignore certain bad spending habits or you’ve fallen prey to a larger trend of lifestyle creep, it’s easy to lose track of where some of your cash is going. Here’s how to perform a spending audit and position yourself to make better financial decisions in the future.
How to conduct your spending audit
Here's how to conduct an effective spending audit that will help your spending habits going forward.
Credit card statements
Digital payment services (PayPal, Venmo, etc.)
I find that three months provides enough data to identify patterns while remaining manageable to analyze. Having all this information in one place helps create a complete picture of your spending habits.
Categorize your transactions
Housing (rent/mortgage, utilities, maintenance)
Food (groceries, dining out)
Healthcare (insurance, medications, appointments)
Debt payments (student loans, credit cards)
Next, look for patterns that illuminate your spending behavior. One way to do this is to mark each item on your bank statements. Place a star next to necessary purchases, a check next to discretionary purchases that you feel good about, and an “X” next to ones that are more questionable.
Create a budget that suits your lifestyle
Finally, at the end of the audit, add up all these problem areas to get a rough approximation of how much money you could route into savings if you changed your habits. Calculate percentages for each category relative to your total spending. Compare these to common financial guidelines, such as the 50/30/20 rule (50% needs, 30% wants, 20% savings).
A spending audit is a simple exercise that lets you spend a little more consciously now, before things get out of control later. And now that you’ve conducted your audit, here are some ways you can get started actually putting together a budget.)
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