Topic 1: Seven Amazing Benefits of Tracking Your Spending
When you graduate into adulthood and begin trying to manage your finances, the first step you’ll often be encouraged to take is to create a budget.
While that’s important, there’s something else even more basic and more important you should explore. Here’s the secret: the budget isn’t any good unless you track your spending.
If numbers and spreadsheets make your head spin, you’re probably cringing at the thought of tracking your spending. Yes, there are certainly hundreds of ways to do this and yes, you’ll need to do a little math.
But instead of focusing on the how, let’s talk about the why. If you’re willing to recognize the benefits of tracking your spending, you’re more likely to do it (math and all). Here are seven benefits of tracking your spending to get you motivated to start.
1. Creating A Meaningful Budget
To create a meaningful budget, you need to understand a little bit about where your money goes. You probably know how much your rent or mortgage is. It’s a budget category that shouldn’t fluctuate too much. But how about your grocery bill? Many areas of your budget will fluctuate weekly, monthly, or seasonally. It’s important to track your spending for a longer term to build a better budget. And when you build a better budget, you’re more likely to stick to it. Tracking your spending for a while before creating your budget means you’ll have an excellent starting point for your spending plan. You already know where your money is going – you’re just documenting it in the budget. From there, you can decide what changes you need to make.
2. It Combats Mindless Spending
Speaking of changes you need to make, you’ve probably heard one of those sob stories – the kind where someone making six figures a year is broke. How does that even happen? It’s because they spent, spent, spent, and never had a plan for where the money was really needed. That’s why having a budget is so important, but it’s not enough. If you’re spending way off plan, you’ll find yourself in the hole every month. On the other hand, if you track your spending – even without a budget – you might uncover a few shocking numbers. Tracking your spending puts your expenses in black and white. There’s no denying your problem areas anymore. Knowing is half the battle.
3. Motivated to Cut Back
Similarly, you might have known good and well that you spend around Rs.10,000 (approx.) per month on groceries, but as you compare your spending to your budget, you might realize some areas need to be trimmed. You might also decide the excess money you’re spending is better off going toward debt or savings. Likewise, seeing a large electric bill will make you more likely to shut off lights when you leave the room (just like your mom always said to do). A large water bill might make you question your 30 minutes showers. You’ll likely continue along with your daily routine until you see the impact it has on your wallet.
4. Getting Your Partner on Board
Finances are one of the biggest causes of stress and tension in long-term relationships. That’s more likely to be the case when neither party has any idea what the other party is doing with their money. The very act of tracking spending together as a couple makes it more likely that you’ll coordinate with your partner ahead of purchases. However, it also closes the loop after purchases have been made. You can check to make sure all your expenditures align with the priorities you have as a team.
5. You Catch Expenses You Forgot About
When you’re tracking your spending, don’t just add up all the receipts you have. Go back through your bank accounts and make sure you capture everything. Many people will find there are a few charges they forgot about. These charges are often subscriptions you signed up for a long time ago, and you might not have used the service in years. People are especially prone to signing up for a “free” service that’s only free for a few months. Then it begins to charge you. You probably told yourself you would cancel the subscription before the charges kicked in, but then forgot.
6. Confirms If Your Spending Aligns with Your Values
Are you in debt payoff mode? Are you saving for a house down payment or retirement? No matter who you are or how old you are, you likely have some long-term financial goals. The goal of your budget is to make those long-term goals happen. However, your spending puts the pedal to the metal. You budget means nothing unless you abide by it. However, each month you find you’re short of making that happen because you spent too much money on entertainment or eating out. Tracking your spending allows you to start questioning yourself. Are these expenses really in line with your priorities? One special note here: you can change your priorities. Debt payoff might be your priority today, but tomorrow it could be different. Make sure you know what your top priorities are by reviewing them monthly. Don’t allow your spending to control them.
7. Simplifying
As you move forward, you might find you want to simply your life, so you cause yourself less pain when reviewing your finances. You might force yourself to plan better for grocery store shopping expeditions, so you don’t have to run back to the store. A natural outcome of simplification is experiencing a small amount of savings. Fewer trips to the grocery store each week means less opportunity for impulse buying. The first few weeks of tracking your spending will be the hardest but have no fear! It will get easier, and the benefits of tracking your spending will outweigh any negatives. The sooner you get started, the sooner you’ll experience these benefits.
Source:everythingfinanceblog.com
While that’s important, there’s something else even more basic and more important you should explore. Here’s the secret: the budget isn’t any good unless you track your spending.
If numbers and spreadsheets make your head spin, you’re probably cringing at the thought of tracking your spending. Yes, there are certainly hundreds of ways to do this and yes, you’ll need to do a little math.
But instead of focusing on the how, let’s talk about the why. If you’re willing to recognize the benefits of tracking your spending, you’re more likely to do it (math and all). Here are seven benefits of tracking your spending to get you motivated to start.
1. Creating A Meaningful Budget
To create a meaningful budget, you need to understand a little bit about where your money goes. You probably know how much your rent or mortgage is. It’s a budget category that shouldn’t fluctuate too much. But how about your grocery bill? Many areas of your budget will fluctuate weekly, monthly, or seasonally. It’s important to track your spending for a longer term to build a better budget. And when you build a better budget, you’re more likely to stick to it. Tracking your spending for a while before creating your budget means you’ll have an excellent starting point for your spending plan. You already know where your money is going – you’re just documenting it in the budget. From there, you can decide what changes you need to make.
2. It Combats Mindless Spending
Speaking of changes you need to make, you’ve probably heard one of those sob stories – the kind where someone making six figures a year is broke. How does that even happen? It’s because they spent, spent, spent, and never had a plan for where the money was really needed. That’s why having a budget is so important, but it’s not enough. If you’re spending way off plan, you’ll find yourself in the hole every month. On the other hand, if you track your spending – even without a budget – you might uncover a few shocking numbers. Tracking your spending puts your expenses in black and white. There’s no denying your problem areas anymore. Knowing is half the battle.
3. Motivated to Cut Back
Similarly, you might have known good and well that you spend around Rs.10,000 (approx.) per month on groceries, but as you compare your spending to your budget, you might realize some areas need to be trimmed. You might also decide the excess money you’re spending is better off going toward debt or savings. Likewise, seeing a large electric bill will make you more likely to shut off lights when you leave the room (just like your mom always said to do). A large water bill might make you question your 30 minutes showers. You’ll likely continue along with your daily routine until you see the impact it has on your wallet.
4. Getting Your Partner on Board
Finances are one of the biggest causes of stress and tension in long-term relationships. That’s more likely to be the case when neither party has any idea what the other party is doing with their money. The very act of tracking spending together as a couple makes it more likely that you’ll coordinate with your partner ahead of purchases. However, it also closes the loop after purchases have been made. You can check to make sure all your expenditures align with the priorities you have as a team.
5. You Catch Expenses You Forgot About
When you’re tracking your spending, don’t just add up all the receipts you have. Go back through your bank accounts and make sure you capture everything. Many people will find there are a few charges they forgot about. These charges are often subscriptions you signed up for a long time ago, and you might not have used the service in years. People are especially prone to signing up for a “free” service that’s only free for a few months. Then it begins to charge you. You probably told yourself you would cancel the subscription before the charges kicked in, but then forgot.
6. Confirms If Your Spending Aligns with Your Values
Are you in debt payoff mode? Are you saving for a house down payment or retirement? No matter who you are or how old you are, you likely have some long-term financial goals. The goal of your budget is to make those long-term goals happen. However, your spending puts the pedal to the metal. You budget means nothing unless you abide by it. However, each month you find you’re short of making that happen because you spent too much money on entertainment or eating out. Tracking your spending allows you to start questioning yourself. Are these expenses really in line with your priorities? One special note here: you can change your priorities. Debt payoff might be your priority today, but tomorrow it could be different. Make sure you know what your top priorities are by reviewing them monthly. Don’t allow your spending to control them.
7. Simplifying
As you move forward, you might find you want to simply your life, so you cause yourself less pain when reviewing your finances. You might force yourself to plan better for grocery store shopping expeditions, so you don’t have to run back to the store. A natural outcome of simplification is experiencing a small amount of savings. Fewer trips to the grocery store each week means less opportunity for impulse buying. The first few weeks of tracking your spending will be the hardest but have no fear! It will get easier, and the benefits of tracking your spending will outweigh any negatives. The sooner you get started, the sooner you’ll experience these benefits.
Source:everythingfinanceblog.com