What Is the Highlighter Method?

If you've ever looked at your bank account at the end of the week or month and wondered, “Where did all my money go?” the Highlighter Method may be a great budgeting exercise for you.

The Highlighter Method is a simple, visual way to track your spending and see exactly where your money is going. Instead of looking at a long list of transactions and trying to make sense of everything, you use different highlighter colors to separate your spending into categories.

I talk about this method often because it is one of those simple exercises that can really open your eyes to your spending habits. Sometimes we think we know where our money is going, but seeing everything broken down by color can tell a very different story.

How Does the Highlighter Method Work?

Start by looking at your transactions for a specific period of time. You can use your bank statement, transaction history, budget planner, or wherever you normally keep track of your spending.

Next, assign a different highlighter color to each spending category. Your categories might include:

• Bills and monthly expenses
• Groceries
• Gas and transportation
• Eating out
• Shopping
• Savings
• Sinking funds
• Personal or fun spending

Then go through your transactions one by one and highlight each expense with the color that corresponds to its category.

Once everything is highlighted, total each category.

This is the part I don't want you to skip!

Seeing all of those colors is helpful, but actually adding up the numbers shows you how much you spent in each area. You may realize that you spent more on groceries than you thought, made more small purchases than you realized, or spent money in a category that wasn't originally part of your plan.

And that's okay. The purpose of this exercise isn't to make you feel bad about what you spent. It's to give you information.

Why I Love This Method

One of the reasons I love the Highlighter Method is because budgeting doesn't always have to be complicated.

You don't necessarily need another app, spreadsheet, or complicated system. Sometimes sitting down with your transactions, a few highlighters, and your budget is enough to help you understand what's happening with your money.

It also makes your spending visual.

Instead of seeing a page filled with numbers, you begin to see patterns. If one color is showing up over and over again, that's something you can pay attention to.

That doesn't automatically mean you're doing something wrong. It simply gives you an opportunity to ask yourself:

Is this where I want my money to be going?

That question can be incredibly helpful when you're trying to become more intentional with your finances.

Use What You Learn for Your Next Budget

The Highlighter Method isn't only about looking backward at what you've already spent. I want you to use that information to help you move forward.

Maybe you discover that the amount you've been budgeting for groceries isn't realistic for your household. Adjust it.

Maybe you notice you're spending more on eating out than you would like. Set a goal for the next month.

Maybe you realize you're doing better than you thought and you're consistently putting money toward savings. Celebrate that progress!

Your budget isn't supposed to stay exactly the same forever. Your budget should change as your life changes.

Tracking your expenses gives you real information that you can use when creating your next budget.

You Don't Have to Change Everything at Once

This is something I will continue to remind you of throughout your budgeting journey.

Take baby steps.

If you do the Highlighter Method and discover several areas you want to work on, you don't have to fix all of them tomorrow.

Choose one area.

Maybe this month you focus on grocery spending. Next month, you work on eating out. Maybe your first goal is simply getting into the habit of tracking consistently.

Small changes made consistently can turn into completely different financial habits over time.

And remember—your budget doesn't have to look like mine or anyone else's. Your income, expenses, family, goals, and priorities are your own. Use the Highlighter Method as a tool to learn more about your money and then create a system that works for your life.

Watch Me Use the Highlighter Method

Sometimes it's much easier to understand a budgeting method when you can actually see someone do it.

Be sure to watch the video below, where I walk you through how I use the Highlighter Method in my own budgeting routine and share some tips for making the process work for you.

My hope is that you walk away feeling a little more confident, a little more aware of your spending, and ready to take your next small step.

You don't have to have everything figured out. You just have to be willing to start.

Christina Loves Planning 🤍

This one is much stronger as a permanent blog now. And I purposely didn't turn it into a sales pitch. It's an educational piece that establishes what you teach, gives people something they can actually try, and then your video reinforces it. That's exactly the kind of evergreen budgeting content I want you to have on the site.