By Nermeen Nabil Khear 
I know what it’s like when the thought of looking at your personal finances makes your stomach churn. The first step to getting control of your spending is to take a hard look at where your money actually goes. Now, I’ve previously lamented how many sources like to overstate the impact of small purchases, like your morning iced coffee, on your long-term finances. At the same time, you really shouldn’t be spending more than you earn, which makes it difficult to pay off debts and save money for the future.
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.
What is a spending audit?
An audit is a review, not a budget. Many people choose to look forward and create a budget without being honest about their current spending habits. But the goal of “cutting back on spending” is abstract and hard to achieve. Better to figure out what you’re actually spending first, and go from there.
Think of your spending audit as the sometimes painful, but definitely necessary, first step to creating a budget that actually works for you. Review all of your transactions from a certain amount of time—for our purposes, let’s say three months of spending. Then, consider what the results say about your spending habits and what you can change.
How to conduct your spending audit
Here’s how to conduct an effective spending audit that will help your spending habits going forward.
Gather all your numbers
Kick off your audit by collecting around three months’ worth of financial statements from all your accounts, including:
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Credit card statements
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Bank account transactions
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Digital payment services (PayPal, Venmo, etc.)
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Cash expenditures (tracked through receipts)
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
Create meaningful categories that reflect your lifestyle. Common categories include:
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Housing (rent/mortgage, utilities, maintenance)
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Transportation (car payments, fuel, public transit)
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Food (groceries, dining out)
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Entertainment (streaming services, hobbies, events)
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Healthcare (insurance, medications, appointments)
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Personal care (haircuts, gym memberships, clothing)
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Debt payments (student loans, credit cards)
Go through each transaction and assign it to a category. Be honest with yourself—that coffee shop visit might be “food” or “entertainment,” depending on your perspective and habits.
Start looking for pattens
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.
Once you’ve marked all the expenses that you regret or want to change going forward, group them together and ask yourself some questions to identify your problem areas. Think: Is your coffee habit out of control? Are you spending too much on a gym membership you rarely use? Have your monthly subscriptions gotten out of hand? Are your debt payments higher than you can afford right now? You might be surprised to find how many expenses you’ll be able to eliminate, whether because they were unintentional or were motivated by stress.
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.)
This articles is written by : Nermeen Nabil Khear Abdelmalak
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