How to Capture Receipts from Daily Expenditures

Capturing your daily expenses is an essential part of personal finance. Without understanding where your money is going, you will have no chance of building wealth or paying down debt. Included in this post a few of the best ways to capture your daily expenses.

If you read through any personal finance book  you’ll notice that the writer will recommend that you capture your daily expenses.  The thinking behind this task it to get an actuate picture of your daily, weekly, and monthly spending.  As with most things in life, it’s hard to make a change for the better if you don’t know where you currently are.  Just like in the previous post in this series: Financial Reality Check , you need to completely understand how you spend your money in order to make changes.  After seeing how money flows out of your hands, you can begin to make changes that will greatly improve your chances of holding onto more money in the future.  If you have never done this before, I will extend a word of caution.  You will be completely surprised at how you are spending money.

Personal Finance

Personal finance is completely personal and there is no perfect way to capture your expenses.  The techie might scan/enter all transactions into their smart phone.  The old school paper lover may keep a Moleskin notebook and record every transaction on the beautifully lined pages of the notebook.  Others may decide to stuff the receipts in an envelope labeled Day 1 or Week 1.  The pack rat may choose to hold all receipt in a shoe box with the label of the current month.  It really doesn’t matter what method you use as long as you have a method.  The receipts/records will be used to develop categories and provide the map of how your money is being spent.

As you may have guessed by the title of this post and the few paragraphs leading up to here, we are only gathering data at this point.  Don’t focus too much on how to sort and separate the individual receipts/records.  We will be investigating the art of category development in the next installment of the Debt Destroyer.  If it makes you feel better you can add a keyword (tag)  to each piece of data, just remember the keyword/category may change in the future.

Daily Expenses

What is a daily expense?  For the purpose of this exercise, a daily expense will be anything that you spend money on during a typical day in the life of _____ (fill in the blank).  If you receive a bill from the cable company make sure to pay it and add amount spent into your capturing system.  If you purchase a coffee on the way to work, ask for a receipt and add that amount into your system.  If you hit up the ATM before hitting the clubs, add it to the pile.  Get the point?  Everything you spend money on needs to be accounted for.  Tip: Always get a receipt and use the exact amount you’ve spent to record the information.  If you are one of those debit/credit card users who performs every transaction with plastic, I urge you to not rely on the statement as your capture tool.  You will miss something along the way.

Methods of Capture

• The Shoe Box: It is by far the simplest method to use and will prove to have a secret benefit when the month is over and you begin to decode the mystery of your daily, weekly, and monthly spending.  The process is easy.  For every single purchase you make, get a receipt and drop it into the shoebox.  Leave the shoebox on the counter or in a cabinet, but EVERY receipt needs to be dropped in the box.  When a bill arrives in the mail or through your email inbox, pay the bill and drop a copy of the statement into the shoebox.  If you purchase a song on iTunes, print the receipt and drop it in the box.  Get it?  Everything you purchase needs a receipt and needs to be added to the box.  Hack: take an extra second to review the receipt to make sure the item/items purchased are identified on the receipt.  If they are not, make a quick note on the receipt so you know what you’ve purchased.  This will help to streamline to categorization process in the next step of the Debt Destroyer.

• Envelopes: You can use envelopes the same way as the shoebox.  One way is to take 4 or 5 blank envelopes and write week 1, 2, 3, etc. on the front.  All of your receipts will then get placed into each “bucket” and you’ll end up with a weekly breakdown of how you are spending.  This can help you to review spending each week and make adjustments to your spending quicker than waiting until the end of the month.  If you are an impatient person, this may be the best choice for you.  You’ll be able to make changes on the fly, but you still need to keep the information for the next phase of the Debt Destroyer “Setting up categories”.  Again, if the receipt is not detailed – add a quick handwritten note on the receipt.

• The Notebook: If you are particularly anal organized then using a notebook might make you feel better and much more in your element.  For every purchase you make, write down the date, amount, and item that was purchased.  Tip: if you are the impatient type you can draw a line at the end of each week and total the amount you’ve spent for the week.  This will help you curb some bad habits like the envelope system, and bit quicker than the shoebox method.

• Smartphone/Computer: Just like the notebook method, use whatever note taking program you have to record the date, amount, and item that has been purchased.  Make sure to save the data in two or more places so you don’t lose the information.  Since I’m a nerd, I use Evernote to capture and archive my receipts and other financial information.  I will be posting “How to use Evernote to capture receipts” later this week.

Choices

You have a few choices now.  If you are using any of the weekly methods, you can begin to sort the receipts/data into piles or buckets.  One bucket may be gas while another may be lunch, it doesn’t matter as long as you can understand it.  I’ve been saying throughout this post, don’t focus on the “bucket” yet, any general category will be fine for now.

Good luck.  Gathering this information is extremely important.  You MUST know how you spend money if you ever want to make a change in the future.  Waving a magic wand isn’t going to cut it, you need to put in a little leg work so you can put your financial system on autopilot later.

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