Big budget month day two: looking at your spending

In the second of our month-long series of articles on budgeting, we look at the importance of reviewing your spending.

It's all too easy to lose track of what we're spending where.

So to help you understand your spending habits, a good first step is to set up a spending diary – in other words, a list of what you spend where.

You can do this using the free MoneyTrack tool right here at lovemoney.com. If you register your bank accounts and credit cards on our secure service, every time you make a purchase – no matter which bank account or credit card you use – the tool will record it for you.

You can then easily categorise all of your transactions so you know exactly what you're spending your money on every month. Alternatively, just make a note of everything you spend on paper.

Every time you spend money, keep a record of it somewhere. Don't leave anything out, no matter how small, from a 20p newspaper to a cup of coffee - you'll be surprised how the little things add up! It's worth doing this for about a month to help you get a detailed picture of what you spend and when.

You can then combine this information with the regular earnings and outgoings you put together on the budget sheet that we talked about on day one.

Now you have all this information at your fingertips you can take a long, hard look at your spending and what you can cut back on. Highlight the purchases that seem inessential or you could do without and tot up how much they cost you. You'll probably be surprised at the amount.