Posted by Mike Smith :: June 29, 2007 @ 8:27 am

If you’re having trouble making ends meet, or your savings aren't growing as quickly as you expect, the question of "Where did my money go?" may constantly be on your mind. Learning the answer may seem like an overwhelming task, but it's one worth doing.

There are many computer programs available to help you track your monthly expenses. What matters is that you track expenses, not how you track them. You can track things in whatever way makes sense for you: using a program designed for that purpose, using a basic spreadsheet, or even good ol' pen and paper.

There are two main reasons to track your expenses:

1) Discover where you are spending more money than expected

Basic tracking will help you to cut back in areas that you didn't even know were causing problems. The classic example is how much your daily coffee adds up to over the year. This isn't done so that you’ll say "I can save x-dollars a year if I give up coffee," but rather, "Are those daily coffees worth x-dollars a year to me?" You may decide that your daily coffee is worth it to you. You can't make that decision unless you have accurate information.

2) Set reasonable savings goals

You can't expect to save $1,000 a month (or whatever your goal is) if you only have $100 left after all of your expenses. Without accurately tracking your expenses, you’ll likely be frustrated if you cut back on spending and don't see the results you expect -- even if your goals were not reasonable.

You will gain control of your finances after you decide which expenses are necessary and which can be cut back. Set reasonable saving goals for yourself. Limiting certain expense categories can help you to stay on track with your plan. This entire process will only work if you have the discipline to stick to your plan. Fortunately, the pain of passing up an "urge to splurge" gets easier the more you do it.