Chapter 2: Literature Review

2.1: Introduction
This chapter sets out to review existing systems used in tracking expenses. It will also focus on
work done to make it easier to track your expenses, other methods in place used to track
expenses and the challenges of the current system. The importance of a good expense tracker is
that it will positively affect an individual’s financial awareness.

2.2: Process of Tracking Expenses

Tracking expenses is a fundamental aspect of personal finance management. The process
involves meticulous recording and analysis of all your personal finance transactions to gain a
clear understanding of how much money an individual spends. By having these practices, an
individual is empowered to make better financial decisions.

The first step in the expense tracking process is to set clear financial goals. These goals are
meant to serve as a driving force behind a person’s expense tracking efforts. Some of the goals
could include saving for a vacation, paying off debt and building an emergency fund. Identifying
your financial objectives is very important because it not only provides a sense of purpose and
motivation to precisely track your expenses, but it also helps you get closer to achieving these
goals (Indeed Editor, 2023).

The second step involves choosing a method to track your expenses. Some of the methods
include employing traditional pen-and-paper recording, creating, and maintaining spreadsheets
or using tracking applications and software. The choice in which method to choose depends on
personal preferences and the level of automation desired. For example, digital tools offer the
advantage of real-time updates and automatic categorization which would be suitable for an
individual who wants a high level of automation.

The third steps include gathering the necessary information. To track expenses effectively is
particularly important to gather all relevant financial records. Some of the records include
receipts, bills, bank statements, credit cards statements and any other documents that help shed
light on your spending patterns. These documents serve as the raw data that is used in the
personal expense tracking process.

The fourth step is creating categories. As stated by Audrey Carroll, categories are the backbone
of expense tracking (Carroll, 2023). They help an individual organize spending into logical
groups. Common categories include housing, food, transportation, entertainment, utilities, and
savings. The categories are supposed to be categorized to suit a person’s financial situation. The
more detailed and specific your categories, the more insightful your expense tracking will be.

The next step is recording all transactions and tracking cash spending. The heart of the expense
tracking process is the consistent recording of every financial transaction. The key is not to omit
any expenditure regardless of how small or unnecessary it may seem. The reason for this is
because it is very easy to underestimate the cumulative impact of minor expenses over time. This
can be paired with tracking cash spending. This is one of the challenges in expense tracking since
often there is no digital trail of the spending. To address this, an individual needs to maintain a
system where all cash expenditures are recorded. Every dollar spent should be tracked, ensuring
a complete and accurate record.

After the previous step you are supposed to review and categorize. The regular review of
expenses is essential to ensure that each expense is categorized correctly. No matter what route a
person chooses, it is important to make sure that routine time is set aside to check on spending
and evaluate your financial progress as you go (Gravier, 2021). This helps an individual to
understand where their money is going and aids them identify spending patterns. It allows an
individual to gain insights into their financial habits and make more informed decisions. There
can also be a monthly and annual review. This is where a person checks their monthly and annual
financial tendencies to stay on top of their financial situation. This type of review not only paints
a better picture of your financial trends but also ensures an individual is aware of their financial
health and can make timely adjustments to their budget.

The last step is, adjust and improve. Flexibility is crucial in expense tracking. As an individual
continues to monitor their spending habits, they may identify areas where they are overspending
or areas where they can save more. This allows them to make changes that will aid in improving
their financial situation. People are encouraged to be open to adjusting their financial choices
which may aid in bringing their expenses in line with their goals.
To some people all this may be challenging, therefore one is encouraged to seek advice from a
financial advisor or counselor. These individuals can provide expert guidance that helps establish
a robust financial plan and offer strategies to achieve their goals more effectively.

2.2.1: Challenges Faced When Expense Tracking

There are many challenges that occur when expense tracking. One of the major challenges is
maintaining the discipline and consistency to record all expenses. It is also challenging to
categorize expenses into the right category. All this can be time-consuming and tedious to track.
The other challenge is that when there are multiple methods of payment like cash, credit cards,
and digital wallets, it can be difficult to consolidate and track all your expenses accurately.
Lastly, consistently tracking expenses can lead to data entry fatigue, which is a big challenge
because this may cause individuals to abandon their expense tracking efforts.

2.3: Related Works

There are a few working projects that have been implemented to solve the gaps in the existing
expense trackers. These are some of the best expense trackers implemented.

2.3.1: Goodbudget
Goodbudget is a budgeting application that relies on the traditional envelope system to help users
to budget their monthly expenses. This application is an excellent fit for users who want to
organize their priorities and move forward financially (Whiteman, 2023). The envelope system is
a method that requires the user to divide the available money for spending into separate
envelopes that represent their key spending categories (Lake, 2023). To access Goodbudget an
individual needs to download the application and sign up. After the sign-up process is complete
the user is taken to home screen. After this the user must add envelopes to create a budget, add
their accounts, add their income, fill their envelopes, and record their expenses. The challenge of
using this application is that it takes a long time to set it up and requires an individual to pay to
access other features. This may discourage a user from using the application.
Figure 2.1: Screenshot of Goodbudget Application

2.3.2: Mint
Mint is a personal finance application that makes managing and saving money easy. Developed
by Intuit, Inc, the creators of turbo tax, this mobile application is a budgeting tool that lets the
individuals that use it manage and keep track of their spending. An individual can also set
category-specific budgets and savings goals (Etzel, 2023). To access mint an individual needs to
download the application and sign up. After the sign-up process is complete the application is
ready to use. The application allows an individual to set a monthly budget, categorize expenses,
track spending habits, and monitor credit score. The challenge of using this application is that it
takes a long time to set it up which may discourage many people from using the application.
Figure 2.2: Screenshot of Mint Application

2.3.2: QuickBooks
QuickBooks is an accounting software application developed by Intuit Inc. This application is
designed to help not only normal people but also small and medium-sized businesses with their
financial management and bookkeeping needs (Haan, 2023). To access QuickBooks, you need to
download the application and sign up. After this you add QuickBooks live which helps an
individual fully customize their setup. Then if you require more services you must subscribe to
QuickBooks. The challenge is that this application is one of the more expensive expense trackers
which, for an individual trying to reduce spending, would discourage them from using the
application.
Figure 2.3: Screenshot of QuickBooks Application

2.4: Gaps in the Existing Works

Although current works have made progress there are still gaps that have caused some
shortcomings. The main challenge in the existing system is that most of these expense tracking
applications require an individual to pay for their services. For most people who look to spend
less may see this as a deal breaker. The other challenge is how complicated most applications
are, most applications have a learning curve which may deter most people from wanting to use it.
To add to that, most applications that require the user to set up take too long to set up which
discourages the user from using it.
2.5: Conceptual Framework
PesaPolice is a system that is used to track personal expenses in an efficient manner. This system
is free to use and only requires the user to create an account to access all its features. After the
creation of an account the individual will be able to enter expenses and categorize as they please.
The data entered will be saved in the system after which the system will make reports with the
data. This is supposed to paint a picture on individuals’ financial trends. The user should find the
system easy to use and it will not require them to learn much for them to be able to use the
system.

Figure 2.4: Conceptual Framework