This post includes affiliate links to products I truly recommend. I may earn a small commission at no extra cost to you, when you click on my link and made a purchase which I will then use to support this blog.
Are you a cash only type of person? Or are you like me who live and die by your debit and credit card or cashless payments?
Well, I actually use cash too, when there is no option for cards or cashless payments. I just find cashless payments very convenient. I just hate waiting in the lines at the ATM machines. It seems like forever! And in these unpredictable times, cashless payments are generally safer than paying with cash. The lesser the contact, the safer you are.
Regardless of the method you use to make your purchases, it is important to not only know how much was spent and what was purchased. Just knowing that you overspent won’t really help to solve the issue of overspending. You have to know the culprit. And you get to know that when you track your spending.
I admit, it isn’t really easy to do. I myself fail to do it sometimes and whenever I remember doing so, I’d immediately try to write down everything I could remember in my physical Financials notebook (yes, I have a notebook for just my finances). Or I would write down in my digital Financials notebook in Evernote. ( This is an affiliate link. )
Though I love writing down, especially in a cute expense tracker notebook or binder, I find Evernote very handy since I can just copy and paste everything to our spreadsheet. And since I have the Evernote app downloaded in my phone, I can just actually list down any expenses when I am out and I don’t have my binder or notebook with me.
However you track your expenses, knowing where your money is going helps you accomplish a whole lot of other things.
You get clear of where you spend the most.
The first advantage to tracking your spending is that you can visually see how much you are spending in a particular category.
In our budget, I would categorize the things that we are spending on. Then I have added a percentage column to show the percentage of each category.
What I realized from tracking our spending is that knowing the exact figure that is spent on a particular category will lead to a subconscious effort to control spending in that area.
Seeing the percentage goes up in one category helps us examine our purchase and plan our shopping list for the next month. I get to have a general idea on what is eating up our budget and if that is essential or it can be reduced.
I get to know our spending habits and what we tend to buy on a regular basis that will also make me plan how we’ll shop next time. I would then examine if we can buy in bulk if it is wiser and we can save more. Or I’ll check for cheaper alternatives if needed.
This can be extreme though and you may not need to do it, but having a spreadsheet of items with their prices helps to get an estimate of how much you’ll spend the next time you go shopping. Especially groceries because most of the items are recurring.
So the next time you budget for your groceries you can just look at the items in your list for that month and get the total estimated amount. This is still considered as an estimate since prices may vary from store to store or the price could increase the next months so add a little buffer each time.
You get to save more money.
Secondly, by tracking your spending you can effectively set up a savings plan that will help you to avoid financial disasters.
It is important that you have different kinds of savings funds set up for different financial goals. So getting clear on your spending will make you budget your money wisely. You get to avoid overspending. So you can set aside money consistently to your savings.
Some ideas for a savings funds are:
- Emergency Fund
- Travel Fund
- Wedding Fund
- Child Education Fund
- Investment Fund
- Debt Fund
Having an emergency fund, can help you be ready in the event something unexpected happens. (i.e. car breaks down, roof collapses, you or a family member gets ill, etc.)
Having a travel fund will help you travel to your dream destination and enjoy the experience without incurring debt.
Having a wedding fund will help you achieve the wedding of your dreams and have that fairytale experience.
Having an education fund for your children will help you send your children to get the kind of education that you want for them.
Having an investment fund will help you grow your assets and add more investments to your portfolio.
Having a debt found could help you finally get out of debts that is holding you back financially.
You may have other financial goals, and you can only achieve them if you plan and set aside some savings month in and out.
You manage your money better.
Tracking your expenditures will also lead to better money management. You will know exactly where you stand financially. This is very helpful in avoiding or reducing overdraft fees and other associated bank fees.
If your bank requires that you keep a minimum balance in your checking account, you will know when you are approaching that limit and can manage your money accordingly.
And as previously stated above, you get to avoid overspending. And because of that you get to achieve your financial goals faster.
Tracking your money could help you see problems in how you manage money. You get to address those issues instead of being unaware and causing serious issues in your finances. You also get to plan and budget better.
You have peace of mind.
Lastly, tracking can lead to peace of mind. Meaning, if done right, you can rest at ease knowing that you have a strong grasp on your finances. You know you are managing your money and not the other way around.
Even if you are not debt free, by tracking you can create a plan that will lead you out of debt (like having a debt fund) and eliminate the stress that goes along with it. You sleep better knowing that you are moving toward your financial goals.
Having known where your money goes also eliminates the stress of thinking where your money goes and what you did wrong in case of overspending. You have a clear picture of where you messed up. And even if that is not very comforting, having clarity and awareness could help you plan to resolve it. You can then accept your mistake and have peace with yourself because you have addressed the issue. It will be just a learning experience for you and you will grow better.
Conclusion
These are just some of the advantages of tracking where your money goes. What is really important is just doing it. If nothing else you can save money, avoid costly fees and be prepared for just about any financial disaster that may happen.
There may be additional advantages that I fail to mention here.And I would love if you’ll let me know.
How do you find tracking your spending? Please do share your thoughts by leaving a comment below.
