How conscious are you of your spending? For so many people, jotting down every transaction every day may seem a little less interesting and of very little significance. But there are amazing benefits which may be critical to your financial success. So, why should you, at all, track your expenses?
The most important reason is to cut down on non-useful spending habits. Here are a few more to look at.
Not knowing where your money is going is such a terrible feeling. You start questioning how you may work hard yet you still have insufficient money to get you a seat at the movie theatre until the following payday.
There is literally nothing or no one that is going to stop you from spending your money. Family and friends directly or indirectly encourage more spending. You have to realize that you are the one who can take charge of your financial decisions. You are the only person who can ensure you do not end up broke, unable to retire and puzzled about how it all came to happen to you.
Tracking your expenses will give you that sense of control, now that you shall be able to ‘see’ where your money really goes.
Do you know how much you spend on food or housing or transportation? Do you know how much money you save for emergencies regularly? What about your discretionary spending, do you know how much it is?
The best way to get all this information is by tracking your expenditure. Once you get the picture of how much you spend and where it goes to, then you will be able to see which things you can cut or eliminate to save some cash.
With this assessment, you might go for living in a cheaper house or selling your expensive car to get a much cheaper one. This action may look small but may have a significant impact on your finances.
The amount you think you use on certain things and the amount you actually use could be so far apart. You will be unable to know this if you are not tracking your spending.
For starters, set a maximum spending limit for say, the month, and once you hit the limit, you know it is time to stop.
If you have debt, be it a student loan, car payment, mortgage or a soft loan you got from someone, getting a visual representation of how much you spend repaying these loans every month can be very illuminating. You can go further to determine how much goes into interests and other fees like penalties.
Getting this information might help to get you focused on getting out of debt as quickly as you can. It could also discourage you from taking any more debt, especially the unplanned kind.
Keeping track of your expenditure makes you think before you start spending. If you already know how much money you have spent and on what, you might be less inclined to buy things on a whim.
Tracking your expenses will help ensure that you are spending money on your main priorities and allocating money toward your set financial goals, which may be paying off debt, building an emergency fund, starting on saving, or investing for your future.
Having insufficient money and at the same time not being able to account for your money may cause a bit of stress. The state of being uncertain whether the amount of money you have may not cover all your bills 100% can be very stressful. Stress is associated with causing the worsening or increasing the risk of various medical conditions.
So it is arguable that if, for you, insufficient money is a great stressor, managing your money better could reduce your stress levels or possibly get rid of the anxiety you have about your money altogether and improve your health.
Finally realizing where your money goes when you get it and coming up with a better plan to help you spend it wisely is a huge win. As small a feat as it may seem, it may help you gain more confidence about the future and you will have better sleep at night. Keeping track can help you stay out of financial trouble.
Tracking your expenses may reveal that you’ve overspent in some categories. It may be tempting to give up and not try again the following month, but it is important to keep on tracking your expenses all through the day, week, month, and year, so that you can realize what you need to adjust and by what quantity.
If you take on an approach that works for you, to track your expenses, it should take just a few minutes. If you consistently track your expenses, you’ll be able to save a lot more while spending less when making the necessary adjustments you need in order to build wealth and go for your dreams.