Most people are aware that you should be tracking your expenses, but few people actually do. Whether tracking spending is just one more thing to worry about, or you’d rather remain blissfully unaware of exactly where your money is going, it’s easy to write off watching your expenses as unimportant.
In reality, tracking your expenses can be a game-changer for your financial health. While you may think you have a good grasp on where your money is spent, you’ll never know where your biggest costs are if you don’t keep a record of your expenses. After just a month of tracking expenses, you might be surprised about just how much you’ve spent in certain areas. Here’s why you should be tracking your expenses:
1) Tracking your expenses will help you meet your goals.
Have you dreamed of a big vacation for years but have never been able to afford it? Do you want to start saving for your child’s college fund but don’t have the extra income to do so? Thinking of making a big purchase like a new car or home? You can’t save for these goals if you don’t have a solid understanding of your spending. Many people are shocked by how much their spending in some areas adds up, from eating out to coffee runs (one $2 coffee every working day of the year adds up to about $500!). Whatever your guilty pleasure may be, you might be surprised by how your spending could be keeping you from reaching your bigger, more important goals.
2) Tracking your expenses will raise awareness about questionable charges sooner.
Identity theft. Credit card fraud. These are things that happen to other people, but never you, right? The truth is, everyone is at risk of financial theft. One key to recovering quickly from theft or fraud is catching the problem quickly. Your bank might notify you of suspicious charges, but oftentimes, you are the best first line of defense. If you aren’t watching your expenses closely, you probably won’t catch issues as soon, leaving your money at risk. Tracking your expenses helps you monitor your money and notice abnormalities early so you can protect yourself.
3) Tracking your expenses reveals your spending habits.
Everyone has at least one spending weakness – one store or item that’s hard to resist. Whether you can’t walk into Target without breaking the bank or you buy lunch out every day, these spending habits can really blow a budget. Tracking your expenses opens your eyes to your spending habits. How much is that Target splurge or quick lunch out on workdays really costing you? Know your habits so you can address any problem areas and improve your financial health.
Tracking your spending doesn’t have to be difficult. Keep your receipts and jot down a list of your purchases at the end of each week or month. Categorize each purchase and see what areas you are costing you the most, and look for ways to cut back or reallocate. There are many apps for your phone that can also help you track your spending as well, such as Mint.
Take the first step towards improving your financial future by committing to start track your finances today!