How to track expenses (and still be doing it in three months)

Why most expense tracking stops in week two

You stop tracking when recording a payment costs more than the record is worth. That happens fast with a form of eight fields, a category list of sixty entries, and the low-grade nag that yesterday's coffee is still unlogged.

So aim for a capture step cheap enough that you keep doing it on a bad day. The rest of this guide is built around that one constraint.

What "cheap enough" looks like

A single line of text is cheap. In Chillar's, quick-add parses one:

• 12.50 coffee @cash #food: an expense of 12.50 from the Cash account, categorised Food
• +2400 salary @bank: income, because of the leading plus
• (45+18)/2 dinner @card: the amount field evaluates expressions, so splitting a bill needs no mental arithmetic

That takes four seconds and no form. A note in a pocket book works too. What decides the outcome is whether the step is short enough to survive a queue at a till.

Coarse categories beat precise ones

Fifteen categories covers a life. Sixty makes a filing system you will not use.

A long category list fails through hesitation. A payment that does not obviously belong anywhere gets postponed, and postponed entries become missing entries. Start with housing, groceries, eating out, transport, bills, health, shopping, entertainment, and one catch-all.

Split a category only after a month where you wanted the detail and did not have it. Wanting it once is a signal you can act on, where "it would be nice to know" tells you nothing.

Reconcile weekly, or the numbers rot

Tracking without reconciliation degrades. You forget a payment, duplicate an entry, log a transfer as an expense. Each error is small, and none of them will tell you they are there.

Once a week, open your bank's balance and your tracked balance for the same account and compare them. If they agree, you are done in fifteen seconds. If they do not, the week holds few enough transactions to scan. Do the same check quarterly and you are reading three months of rows to find one mistake, which is how quarterly reconciliation turns into no reconciliation.

Cash deserves more care, because it leaves no statement to check against. Treat an ATM withdrawal as a transfer from your bank account into a cash account. The money has moved, and you have not spent it yet.

The monthly review is the point

Everything above is bookkeeping. The review is where tracking pays you back.

Once a month, look at the total per category and compare it with the previous month. Watch for a category that moved a lot, and a category that runs larger than you assumed. Both tend to surprise you the first time, and you can act on both in a way a running balance never lets you.

Chillar's groups history by day with income and expense totals per day, and the analytics page shows category totals per month as a pie and a heatmap. A spreadsheet with twelve rows does the same job. Run the review on a schedule rather than when you feel anxious about money, because the anxious version looks backwards and never compares.

When to stop tightening

Tracking has diminishing returns. Recording what you spend earns its keep, and so does categorising it coarsely and reconciling once a week.

Splitting "groceries" into "groceries" and "household consumables" does not. It costs you a decision at every till and answers a question you never asked.

Once you are designing the system instead of using it, the system is finished. Use it for three months.