Money To Live

February 25, 2009

Reader Question: Tracking Spending

Filed under: Uncategorized — by moneytolive @ 2:16 pm

Anita left this comment:

I don’t keep track of my spending. I used to — I was very diligent, recording every item I spent money on, and then periodically adding it up in categories to see what I was spending it on and what I could save on. Although the information was interesting and sometimes very useful, at some point I decided that it was finicky and that I would rather spend my time doing something else. So I stopped keeping records and now I just spend as I please, as long as I stay within my means. What are your Money To Live thoughts on record keeping (and to what level of detail) or not?

Definitely keep receipts and records of anything related to taxes or a major purchase. For anything else, the Money To Live philosophy is that as long as you spend within your means and are comfortable with your savings plan, track your spending in as much or as little detail as you like.

Tax form filing caddy

All of my tax related documents are filed in a pink plastic file caddy. There is a tab for each year, going back to 2002. The front tab is labeled “current,” and anything related to taxes goes right there: pay stubs, W-2 forms, 1099 forms, etc. If all of your income is documented on W-2s, you may not need to keep pay stubs.

Since my taxes are still relatively simple, it is easy to keep each year’s filings together. Homeowners, and parents may have a lot more paperwork with their taxes. Whenever I have too much paperwork to fit in my pink file caddy, I will probably get a small file caddy for each year.

The IRS says to keep copies of your filed tax returns for 3-7 years, depending on your situation. If filing a fraudulent return, the IRS suggests keeping records indefinitely.

Receipts, contracts, and warranties for large purchases should be kept for as long as you still have the item or the warranty is valid. From my past experience buying a car and then disputing the price, I am very glad I kept all of the documents from my car purchase. I keep cell phone and utility contracts for as long as I have the service.

After tax and employment forms, receipts, and warrants, it is a personal preference as to keep track of other receipts. I know people who document every penny they spend. I know one person who did not even read the bills that came across her desk (she just paid them all, and one time missed a $400 erroneous charge on her credit card statement).

A great thing about using credit cards and debit cards is that all expenses are automatically tracked. Most financial institutions make it easy to download transaction data (date, amount, vendor) directly to a spreadsheet or software tracking program.

I find cash spending laborious to track because it requires writing down all expenses as they occur and then transferring the data onto the computer. And then, do I really want to know how many Snickers bars I bought at the office vending machine last month?

Once, as an experiment, I tried to use only cash, so I took my credit card and debit card out of my wallet. On my first plastic-free trip to the grocery store, I realized I did not have any cash with me and returned home without buying anything.

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1 Comment »

  1. Thanks! Your reply was both helpful and motivation to keep good records. Although I did keep all of my receipts, in the past years that has turned into keeping all non-trivial receipts. And then this past year, with my many moves, it has become ditch everything (which I agonised over, as I like to keep my receipts even though they seem useless) but tax-relevant documents and still-viable warranties. So, your blog was a timely reminder to — at least — not lose the essentials!

    Comment by Anita — February 27, 2009 @ 9:28 am |Reply


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