Why Expense Tracking Is So Important (and Simple!)
The best way to know where your money is going is to know where your money is going. Expense tracking helps you keep track of each and every transaction you make, giving you insight on where the majority of your money is being spent each month. I know it sounds like a tedious process, but it is honestly quite simple and will pay off in the end.
Believe or not, there’s a variety of apps you can download right onto your smartphone that help keep you organized (and your wallet happy). Our favorite expense tracking app is called Spending. It’s simple interface allows you to create categories, track expenses, and input incomes. You an even export the report to a .csv file and upload to your computer. It couldn’t get any easier.
So why is expense tracking so important? Let’s first explore a few questions:
How much do you spend eating out per month? (Don’t forget that slice you got for lunch yesterday and your daily lattes from Starbucks!)
What’s the total amount you spend on non-fixed expenses per month?
What amount is left as disposable income each month? (That’s the money left over after paying all of your bills.)
Chances are you don’t know the answer to these questions and that can be a big problem. It may be the reason your bank account is emptier than expected each month. It’s time to take responsibility for your actions, rid of those insignificant expenses, and show your money who’s boss.
Which expenses should you track?
All of them!
Don’t let a penny go untracked (that’s right Mr. Lincoln…we’re on to you). If you spend $1.05 at the store getting a candy bar, track it. If you spend $0.75 on the parking meter, track it. Simply open up your Spending app each time you open up your wallet. It might sound tedious (and even a bit crazy), but it will soon become a habit that pays off big in the end.
Use one account or card to do your spending.
Dedicate one card solely to use for spending purposes — especially one that offers points. Those points then turn into rewards, which can earn you money back in the long run! Also, you’ll have one place where all of your transactions live in case you miss tracking something, you’ll know exactly where to find it.
Track cash transactions too!
Although cash may seem like it’s going extinct in our digital world, it’s still money. Make sure to track whenever you withdraw cash from your account, and how that cash is being used.
Look for spending patterns.
At the end of each month, look over your tracked expenses and see which categories are getting the most action. Find where you are making unnecessary purchases that can be cut from your budget and allocated somewhere else. Are those daily lattes from Starbucks really necessary? Or can you make your coffee at home and use that cash towards your business? It’s about being mindful of your spending habits and making the best decisions for your wallet.
If you haven’t already created a new Excel sheet or downloaded Spending to begin tracking your expenses, it’s time to get started! Still feeling overwhelmed? Check out our website www.financialgps.co for more content about making and saving money, or sign up for our bookkeeping services where we do all the work for you.
Read our post Top 5 Expenses That Are Killing Your Wallet to learn more about how to save and what expenses are eating away at that hard earned cash. Until next time…happy tracking!