Expenses

While income is earned money that flows into your accounts, expenses are anything that you buy or pay for that causes money to flow out of your accounts.

A basic principle of personal finance is to know where your money is going each month. You may have a rough idea—rent, food, utilities—but it's eye-opening to see the exact numbers.

Tracking Your Spending

Many of us have multiple bank accounts, credit cards, and debit cards, and it's hard to keep track of spending. One technique is to export your bank and credit card statements to a spreadsheet and categorize them manually.

Alternatively, you can use software like Copilot Money or Monarch Money, which allow you to connect your financial accounts and automatically categorize your transactions.

Why This Matters

Even if you feel like you know where you're spending your money, it's still a useful exercise to create a record of your spending over a few months. You might be surprised to find:

• Food delivery fees adding $100+/month on top of the meal costs
• Subscription services you forgot about
• Categories where you're spending more than expected

This is an important step in creating a sturdy personal finance foundation. Without accurate knowledge of where your money is going, it's hard to make informed decisions about saving and investing.