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.