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Track Your Spending: 4 Reasons To Start Now

track your spending

Before you can properly set a budget, you need to understand where your money is going. Most people have an idea that they need to track their spending. Ask anyone how much they spend on something each month. They’ll typically respond with a round-a-bout answer. The truth is they probably have no clue of the exact number. It’s likely way more than they think. This is why you need to track your spending.

I’ve been tracking my spending meticulously (still learning!) now for about 3 months. Even though my spending has subsided from when I was a broke fella, I’m still discovering areas I need to work on. Some things are unavoidable, but in most areas of the budget, we can all cut back on something and not miss a thing. I’ve been using a spreadsheet app on my phone to record everything I spend each day, categorized appropriately. After doing this for a short amount of time, I’ve learned a few things. These are the 4 reasons you need to track your spending.

Track Your Spending And Learn Your Exact Number

If you start to track your spending on a regular basis, you’ll start to learn exactly how much you spend and on what. Unless money is just falling out of the sky and into your lap, we all have a monthly limit of how much we can spend. Sometimes, we are living paycheck to paycheck not because of pure economical hardships, but because we underestimate the exact number. This leaves us short at the end of each month, wondering what happened.

If you follow the money trail, your money trail, you’ll find it often leads to a truth most of us have a hard time facing. You’re spending too much. Maybe not all at once. But if you’re coming up short at the end of the month, it’s time to dig deep.  Tracking your spending is easy, facing the reality of your own finances is often a hard pill to swallow for anyone.

It Makes You Accountable

At first, it was tedious tracking everything. I thought to myself, why am I even doing this to begin with. After talking myself out of giving up, I was able to focus on my financial goals. If you set a financial goal, whether it’s paying off debt or increasing your net worth, you owe it to yourself to commit to that goal. That means putting in the work to achieve it. You don’t crush goals by only putting in half the work.

When you track your spending, it holds you accountable. Every time you plug in a number it forces you to question whether or not that’s something I need or just something that satisfies me in the present moment. Having a few months worth of data to look at, I see trends in my own spending. Money spent on things I didn’t need. Now, I can hold myself accountable on making changes in the future.

If you set a goal to save for a vacation, but end up blowing money on a night out, does this line up with your values? Will you simply make an excuse for yourself when you come up short? Being accountable helps us live within our means. You can’t do this, if you don’t track your spending.

Track Your Spending To Find Your Weakness

If you track your spending for a few months or even a month, you now have a clear picture of your financial health. Stomping out your weaknesses keeps the budget healthy.

Everyone has a weakness. Typically, mine ends up being food. Yours may be a night out or coffee stops every morning. You can start to target your spending weaknesses if you find out where your money is going.

I’ve come to find, I can accurately estimate what I’m going to spend each month in what category based on my own habits. I also know areas I will struggle with.

Selling yourself short by exceeding your budget each month only hurts you financially. When it comes to money, being as accurate as possible is what gives us breathing room each month.

With Every Goal Comes Progress

Every time you set a goal in life, whether it’s at the gym or in your wallet, tracking your progress helps you visualize how far you’ve come. Once you figure out your own spending habits, if you track each dollar month to month, you’ll start to feel a sense of accomplishment. This is the motivation used to absolutely crush your debt, save for a home, or retire early.

There are many beneficial reasons to track your spending. Your reasons may be different. The truth is you’re the only person who can take action with your finances.

It all starts with being in control. If you track your spending, you are in total control of where your money is going. Don’t take a backseat. If you want to set financial goals, meeting them requires you to be vigilant.

I challenge you this month, right now, to start tracking your spending. Even if it’s only for one month. Learn your habits, your weaknesses, and know them well.

Fairly Frugal Fella

3 Comments

  1. Tracking spending is great and it’s not something you need to do forever. After a while your new habits will be ingrained and you won’t need to be so meticulous. When we first started to save aggressively we tracked our spending to help us prioritize. We wanted to keep the spending that mattered most but it’s a trade off between cost & benefit. Most people immediately know the benefit of their spending but many don’t know the exact cost. Tracking your spending is the only way to prioritize the items that matter the most to you.

  2. I’ve been tracking my spending for a couple of years now. I’m in the stage where I record EVERY expense, and could see myself getting to a point where I let off a little. Last year was my first year of successfully doing it the whole year, and just having the data to look at has changed how I plan – what big one-off expenses I need to remember, that I need to make good notes when I record random transactions, and that I need to remember that it’s about long term progress – one bad month doesn’t automatically mean your budget is blown. Spending can be in cycles.

    Recording purchases with an app helps me in two big ways:
    1. All my categories and balances are on the main screen, so I HAVE to scroll past those to hit the button for a new transaction. I’m making a decision to spend money in one area while being aware of all the other things I could spend that money on.
    2. I prefer manually recording vs. using Mint or Personal Capital – it’s easier to customize categories and transactions, and it really only takes a few seconds to log a purchase. Considering I spend money maybe once or twice a day (and never on some days), it adds up to 10-15 seconds of work since all the data is automatically saved. YNAB automatically generates reports and syncs and generally requires no technical effort – the time I spend in the program is conscious budgeting time, not troubleshooting a spreadsheet or tinkering.

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