Tracking income is only half the financial puzzle—tracking expenses is the other side that tells the full story. Breaking down my expenses by category each month has been one of the most helpful habits in managing my freelance business and personal life. It’s how I stay in control, identify waste, and adjust my spending based on what actually matters.
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Without categories, everything looks like a lump sum going out. With categories, I get clarity. I know exactly how much I’m spending on software, supplies, professional development, or subscriptions. This isn’t just good for budgeting—it’s critical for tax reporting, goal tracking, and peace of mind. Let me show you how I break it down and what I learn from it. ๐ธ
๐ Why I Categorize Expenses
Categorizing expenses gives me full visibility into how I use my money. It’s not just about how much I spent—but what I spent it on, and why. When I look at my finances without categories, everything blends together. But with categories, patterns appear. I can see where I tend to overspend and where I might want to invest more strategically.
It also makes budgeting easier. I can set monthly targets for categories like “software,” “education,” or “marketing,” and check if I’m on track. More importantly, it helps me make decisions quickly—like whether to renew a tool subscription or delay a course purchase. I no longer guess. I have data.
And when tax season comes? Categorization is a lifesaver. I already know what’s deductible and what’s not, and my records are clean. My accountant loves me for it—and I love how stress-free the process becomes.
๐ Benefits of Categorizing Expenses
| Benefit | Impact |
|---|---|
| Clarity | See exactly where money goes |
| Control | Make smarter financial decisions |
| Tax prep | Simplify deductions and reports |
๐ The Expense Categories I Use
To keep things simple and useful, I use about 8–10 expense categories each month. These aren’t overly detailed, but they’re specific enough to show exactly where my money is going. I separate personal and business expenses, but within my freelance business, I have a few go-to categories that I track religiously.
Here are my main business expense categories: software & subscriptions, marketing & ads, professional development, office supplies, contractor payments, client gifts, travel, taxes & fees, and admin tools. I also track “miscellaneous,” but I try to keep that one minimal—it usually signals disorganization.
Each category tells a different story. If “marketing” is too low, I might not be reaching new clients. If “software” keeps climbing, I revisit which tools I’m actually using. Every line on my budget becomes a conversation starter, not just a number.
๐ My Monthly Expense Categories
| Category | Examples | Purpose |
|---|---|---|
| Software & Subscriptions | Notion, Canva, Zoom | Tools I use daily |
| Marketing & Ads | Instagram ads, email tools | Client acquisition |
| Professional Development | Courses, books, memberships | Skill growth |
| Contractor Payments | Designers, editors, VAs | Team support |
If you’re just starting, don’t overthink it. Begin with 5–6 categories and refine as your business grows. What matters is that your spending tells you something—not just that it’s recorded.
๐งพ Tools I Use for Tracking Expenses
When it comes to tracking expenses, I’ve tried everything—from bullet journals to advanced finance apps. What I’ve learned is that the best tool is the one you’ll actually use consistently. For me, that’s a combination of Google Sheets and a simple app to scan receipts like Expensify or Wave.
Google Sheets gives me full control. I have a tab for each month, and within that, I list every expense with the date, amount, vendor, category, and notes. It takes about 15 minutes per week to stay up-to-date, and I love how customizable it is. I can quickly sort by category or vendor to analyze trends.
For recurring payments like subscriptions or memberships, I use conditional formatting in Sheets to highlight them in yellow. That way, I can easily spot ongoing charges and decide if they’re still worth it. I also use a SUMIF formula to total each category automatically.
๐ Expense Tracking Workflow
| Tool | Use Case | Why I Like It |
|---|---|---|
| Google Sheets | Manual logging & customization | Flexible, clean, and free |
| Wave | Receipt scanning + categories | Auto-syncs with bank and PayPal |
| Expensify | Tracking business receipts on the go | Mobile-friendly & IRS compliant |
I update my sheet every Friday, and once a month I export a copy for backup. If you're someone who loves automations, you could also explore Notion databases, QuickBooks, or even Airtable. But even the most advanced tools won’t help if you don’t build the habit. Simplicity and consistency win every time.
๐ How I Review My Monthly Spending
At the end of each month, I block out 30–45 minutes to sit down with my expense log and do a complete review. This isn’t just about numbers—it’s about evaluating where my money went, how it aligned with my goals, and whether I feel good about those decisions. It’s both analytical and emotional, and I treat it like a non-negotiable CEO meeting with myself.
First, I filter my Google Sheet by category and total each one using a simple =SUMIF function. This gives me a snapshot of how much I spent in each area. Then I compare that against my expected budget. If I overspent in a category, I check why—was it planned, or did something unexpected pop up?
I also highlight any expenses that were one-time, such as buying a new mic or signing up for a course. These aren’t recurring, but they still affect cash flow. By separating them, I avoid panic when one month looks unusually high.
๐งฎ Monthly Expense Review Snapshot
| Category | Budgeted | Actual | Variance |
|---|---|---|---|
| Software | $100 | $120 | +20 |
| Marketing | $150 | $140 | -10 |
| Education | $75 | $0 | -75 |
This review is my moment to reflect. I ask: Did I overspend emotionally or invest intentionally? Did that expense lead to growth, ease, or value? I’ve found that when I reflect monthly like this, I build financial awareness that no budgeting app can give me. It’s about the story behind the numbers—not just the math.
๐ก Optimizing Based on Expense Trends
Once I’ve reviewed my monthly spending, I look for opportunities to optimize. This doesn’t mean cutting everything down—it means making my spending smarter. For instance, if I notice I’m consistently overspending on tools I rarely use, I’ll downgrade, cancel, or swap them for something more essential.
On the flip side, if a category is low but impactful—like education or marketing—I may choose to increase spending there. The goal isn’t to spend less, but to spend in alignment with my values, business growth, and personal energy.
Another thing I do is track ROI by category. For example, did that $100 ad spend lead to client leads? Did the $250 course generate new skills or raise my rates? This kind of thinking turns each expense into a strategic move rather than a passive transaction.
๐ Optimization Review Table
| Category | Opportunity | Action Taken | Result |
|---|---|---|---|
| Subscriptions | Too many unused tools | Canceled 3 platforms | Saved $45/month |
| Education | Under-invested for 2 months | Purchased writing course | Improved client output quality |
I also create a “stop doing” list every quarter. It includes recurring expenses that no longer serve me, categories I’m minimizing, or tools I’m phasing out. This proactive pruning process keeps my financial life lean, focused, and aligned with my current goals—not outdated habits.
๐ Comparing Monthly Categories Over Time
One of the most powerful things I do with my expense log is compare categories month-to-month. This zoomed-out view helps me see financial trends, not just snapshots. I track how each category evolves, whether it’s increasing, decreasing, or staying flat. These insights guide my decisions around scaling, saving, or restructuring.
For example, I noticed that my marketing spend was flatlining for three straight months—and so was my client acquisition. That correlation helped me realize I needed to reinvest more strategically. On the other hand, a rising trend in software costs prompted me to audit tools and consolidate platforms.
To make comparisons easy, I use a summary sheet that pulls in totals from each monthly log. I line up category totals in columns so I can scan changes visually. Sometimes I also convert them into bar graphs or line charts for better clarity. Visuals make patterns jump out instantly.
๐ 3-Month Expense Comparison Table
| Category | July | August | September |
|---|---|---|---|
| Software | $95 | $110 | $130 |
| Marketing | $150 | $150 | $180 |
| Education | $60 | $0 | $90 |
I’ve found that reviewing these month-to-month comparisons helps me avoid complacency. It pushes me to be intentional with money. Instead of reacting at the end of the month, I can plan at the start of the next. And most importantly, I can see if my spending supports my priorities—or distracts from them.
❓ FAQ
Q1. Do I need expensive software to track expenses by category?
A1. Not at all. A free tool like Google Sheets is more than enough if you're consistent. It’s flexible, customizable, and powerful when used well.
Q2. How often should I update my expense tracker?
A2. I recommend once a week. It keeps things fresh in your mind and prevents backlog. I usually do it every Friday as part of my finance routine.
Q3. What if I have both personal and business expenses?
A3. Keep them separate. Use different tabs or sheets for each. This is especially helpful for taxes and understanding the true cost of running your business.
Q4. What should I do if I overspend in a category?
A4. Review it at month’s end. Ask yourself if the expense was necessary, an investment, or avoidable. Then set a tighter limit or behavior plan next month.
Q5. How many categories should I track?
A5. Start with 5–6 essential ones and expand as needed. Too many categories can overwhelm, too few can be vague. Find the balance that makes sense for you.
Q6. Can I use these logs for taxes?
A6. Yes! Clean, categorized expense logs make tax filing easier and can help you maximize deductions. Keep digital copies of receipts alongside logs.
Q7. What if I forget to log an expense?
A7. Check your bank, PayPal, and email receipts weekly. That way you catch anything you missed before it piles up. Don’t rely on memory alone.
Q8. How do I decide which category an expense fits into?
A8. Think about the purpose of the expense. Why did you spend that money? That usually tells you the right category. If unsure, create a temporary “Misc” and revisit later.
This blog post reflects personal practices for expense tracking and is intended for informational purposes only. Always consult a tax or financial professional when making business finance decisions.
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