Why You Need To Track Your Monthly Expenses
Most people know the importance of keeping track of their finances and spending habits. That being said, many people still don’t bother to do it. It can often seem overwhelming or tedious having to keep track of your monthly expenses, but in the end, it’s always worth it.
Tracking your expenses daily can really help you save a lot of money. One of the most important things you can do when trying to get your personal finances under control is to figure out WHERE all of your money is going each month.
If you start off by tracking your expenses each day, you’ll be able to get a better idea of where your money is going. Once you have tracked your spending for thirty days, multiply that by 12 and that is roughly the amount of money that you spend in one year. This is just an estimate because there are months where you’ll spend more money and less money, but this gives you an idea. Talk about an eye-opening experience!
For young adults especially, keeping track of spending is something nearly everyone can benefit from. It doesn’t take much for someone to get off track and start getting caught up in their finances by overspending. Having a handle on what’s going in and out lets people see the reality of their finances, and most would agree that getting started right away is best.
Here are some great tips on how to keep track of your expenses:
- Keep a pocket-sized notebook with you for the entire 30 or 31 days. If you have a Smartphone, you can create a new Note and track your expenses there. Check out these Smartphone Apps that do all the tracking for you.
- Keep receipts from ALL of your purchases. Refer to your checkbook, online banking, ATM/debit receipts, bank statements, credit card statements, and other bills you may have.
- Record every purchase, regardless of the amount spent. Remember the little things like that daily latte can really add up!
- Enter your daily spending totals on a spreadsheet or in a notebook at the end of every day. This will help you total everything up at the very end of the month.
- Organization is the key to staying on top of your daily spending! Make folders and keep it all in one safe place.
- There are online budgeting tools that you can use for free to help you set up a budget.
Did you know that your expenses can be divided into three categories to make things easier for you? The three categories are: fixed, variable, and periodic expenses.
- Typically require a set payment every month, i.e. mortgage payment, rent, loan payments, car insurance, etc.
- Amounts that vary from week to week or from month to month
- Occur on a regular basis
- Some examples are grocery bills, utility bills, entertainment, etc.
- These can be fixed or variable
- Do not occur on a regular basis
- Include such things as quarterly taxes, gifts, clothing, impulse buys, etc.
Know Where The Money is Going –
It’s a good idea to spend according to what is needed or valued most first, which is a difficult thing to do without keeping track of the actual figures. Without keeping track, too much money may be getting spent shopping at the store instead of going into a savings account for that dream family vacation you want to take next year.
It’s easy to start living beyond one’s means when you do not pay attention to what you are spending all of your hard-earned money on, which is how people start to acquire debt. Anyone who’s in debt or has been in debt knows how difficult it can be to climb out of that hole. If you need help getting out of debt, click here.
It’s The Best Way to Set and Meet Goals –
When someone knows where their money is going and has a handle on their finances, they can start setting financial goals. Such as a goal to put away specific amounts each week or month, or have a certain number saved by the end of the year. If someone wanted to buy a new car in 2 years, knowing they need 10,000 dollars, they would have to save at least 420 dollars every month.
That being said, in order for someone to know if they can put away that much each month, they also need to know what all of their other expenses are and if they need the money somewhere else instead.
Forced to Spend on Priorities –
Without an infinite amount of money to spend wherever someone wants, there is only so much money to go around. Putting down all of one’s expenses forces them to prioritize where their money is going to go. It’s much easier to set and meet goals when someone can prioritize where to best allocate their limited amount of money.
Revealing Bad Spending Habits –
By keeping track of where and when money is being spent, it’s much easier to see any bad spending habits that can be worked on. When someone is able to see where their spending weaknesses are, they can begin to make changes to correct them. This understanding may be enough to correct a bad spending habit by making someone question their future purchases and see if they are actually necessary.
Awareness of Fraud of Unknown Charges –
If someone doesn’t bother to keep track of their spending, their bank accounts, or credit card statements, they could be getting fraudulent charges and not even know it. It’s painful to see hard earned money lost or stolen, and it can cause lots of problems or even bankruptcy.
There is also the possibility of overlooking double charges, auto-pay charges, and sometimes not being charged as usual. Keeping track of expenses and financial information means a person will always be aware of where their money is and what’s happening with it, so anything unexpected is dealt with quickly, and is much easier to handle.
Take Control –
If you have not noticed yet, keeping track of financial expenses can do a lot for those willing to spend a little time with it. You don’t have to be a math genius or a penny-pincher to make it work for you.
It can stop the spending impulses, remove needless purchases, force someone to focus on what their money is worth, help anyone from going into debt, and most of all it makes managing money easier and allows a person to be in total control of their finances and their financial future.
Tracking your expenses daily can save you money, but it can also help you set financial goals for the future. If you know exactly where your money is going every month, you can easily see where some cutbacks and compromises can be made. It will also give you a good outlook on your spending habits and those impulse buys will stick out like little red flags.