One of the most important habits you could develop for your personal finances is to track every expense in your life. It doesn’t have to take a lot of time or energy and you don’t need to learn any complicated accounting software. All it takes is a few seconds after every transaction and maybe 10 minutes a week to sort through all your data.
==>The Financial Benefits of Tracking Expenses
There are many reasons to track your expenses.
For one, you’ll be able to see exactly how much certain things are costing you. Little things can feel like spur of the moment decisions every day, but when you actually look at the data you’ll see how much things are really costing you.
For example, let’s say you like to pick up a cup of coffee at Starbucks for $3 in the morning, along with a club sandwich for $5.25. That $8.25 a day might feel very convenient, but when you add it all up that quick pick me up in the morning is costing you $247.50 a month.
Being able to see how much things really cost you in all aspects of your list allows you to make decisions that can save you a lot of money. Perhaps you make a tuna sandwich yourself at home before leaving every day now, saving you $4 a day for a monthly savings of $120.
==>The Emotional Benefits of Tracking Expenses
Aside from the strictly financial benefits of tracking your expenses are the emotional benefits.
For one, you can spend money without guilt when you know exactly how much you’re making and spending. For example, if you know that this week alone you’ve saved $300 dollars from your normal expenses, you might decide to pamper yourself by taking your significant other out to a nice restaurant.
Without tracking your expenses you might feel a little guilty about spending the money, or a vague sense of feeling like you’re doing something you’re not supposed to be doing.
But since you know exactly how much you’re making and spending, you know that you can absolutely afford to have a nice dinner while still staying well in the black. So you can relax and enjoy your night.
Conversely, knowing your expenses can also give you an extra boost of motivation when times are tight. If your finances aren’t in good shape but you don’t know exactly how bad things are, the whole situation can just hang over your head like an unshakable cloud. But once you know exactly what your debt, income and expenses are, you’ll be able to take concrete steps to change your situation.
==>Start With Simple Tracking Methods
Don’t try to use systems that are too complicated. Don’t use QuickBooks if you’ve never used accounting software.
Instead, start with just a pen and paper to write down expenses. Try to write down your expenses every time you spend any money. At the end of the day, enter your expenses into an excel spreadsheet.
Once you get in the habit of tracking your expenses, then you might want to look into more complicated technologies to help you track categories of expenses, weekly breakdowns and so on and so forth.
But the most important thing is that you get in the habit of tracking your expenses. Do that, and you’ll quickly find your emotional and financial health improving.