What do you do with your receipts after you bring them home? Several of my clients save them — piles and piles of them — so that they can analyze their spending patterns and better understand where their money goes.
That’s a worthwhile endeavor. Unfortunately, saving them in piles does not shed any light on your spending patterns. It just creates clutter and causes you stress. It also makes it difficult to find an important receipt when you need it.
If you are really sincere about tracking your spending, then make a plan. This plan would include:
- What software tool you will use to capture and analyze the spending data.
- How often you will enter your receipt information into this tool.
- Where you will store the receipts that are waiting to be entered.
- What you will do with the receipts after you enter the information.
The easiest way to capture data off receipts is to type it into a spreadsheet program such as Microsoft Excel. Create columns for the date, vendor, amount, category, and any comments. The category could include groceries, clothes, medical, restaurants, gifts, etc.
Give some thought to your categories before you get started. If you itemize your deductions on your tax return, then you’ll want to make sure that your categories include those that appear on that IRS form.
Think how much easier it will be at tax time if you’ve got this information already captured and added up!
If you want something more robust than Microsoft Excel, then try Quicken. This personal finance management software by Intuit has been around since the 1990’s. I just started using it last year. Even though I enter my receipts into Quicken every couple of days, I love that it seamlessly connects with my banks and my credit card companies. Any receipts I’ve already entered get cross-checked, and any transactions for which I don’t have a handy receipt — such as on-line transactions or automatic payments — get downloaded.
Whether you go with the Excel or Quicken or something in between, I recommend that you don’t let more than a week go by without entering your receipts — or downloading your data and checking it against your receipts. Otherwise the paper will pile up and you’ll forget the details of what the receipt is for.
Once you’ve captured the data, you can throw out your receipts — with some exceptions:
- You need it to support a tax deduction.
- You may return the item.
- You want to keep proof of purchase because the item has a warranty.
- It’s a large ticket item and you want to keep it for insurance purposes.
There are scanners out there — such as Neat Receipts — that enable you to scan in receipts and import the data into Excel or Quicken. Although I’ve heard some success stories, my clients who have used this method have not had great success. I believe that it doesn’t take much more time to just type the information in, since scanned information needs to be carefully proofread and often corrected.
The bottom line: it doesn’t matter what software you use, as long as you do something!
If reading through this tip has made you realize that you are not willing to put in the time required to track and analyze your spending — then do yourself a favor and go dump those receipts now!