The year being so young, I believe tracking our expenses is a great behavior to pick on. I cannot insist enough on how important it is. I know it sounds silly but it is the first step to good money management. Knowing where every cent of our money goes to, gives us power over our finances.
Moreover, it is also an important step in budgeting as it acts as our spending blueprint on which we can build our budget on. Most of our budgets do not work because we make unrealistic budgets. We often have no idea what are the realistic items to have in our budgets or even amounts to allocate to those items. Most of us are only aware with certainty on what we spend on our large bills such as rent, water and electricity bills, the rest we kind of wing it.
In addition, tracking our expenses gives us an idea of whether we are spending our money on necessities or non-necessities. Trust me, at the end of the month we all believe we have spent our hard earned money on only needs, I too fall in this category. However, having it all recorded, offers us a chance to revisit all our expenses, analyse them and determine whether they were needs or wants we thought were needs at the time. This is the first step in making better spending decisions in the future.
Sadly, despite knowing all the benefits of tracking my expenses, I also struggle a lot with it. I try to note most of my expenses although I often forget to do it half the days. I however do update it as soon as I remember but this has its own challenges.
Over time I have found having an app is the easiest way to track my expenses and thanks to this era, they are a million and one apps that offer these services. Personally, I use money manger. I find it simple: it gives me a good summary of where my money goes to and it is free.
I have also made a point to always note things immediately. This is because I have come to realize that I often forget to update my spending sheet on days which I tend to procrastinate. Yes, I may sometimes do it later however more often than not I wouldn’t remember the exact pricing or all the purchases I made hence I end up approximating the costs. Doing it immediately only takes a minute and it brings with it accuracy which is very important when analyzing our finances. And since I have the app on my phone, it means I always have the spending tracker with me and recording as I spend becomes quite easy.
Lastly, once we track our expenses, its very important to take time at the end of the week or month to go through our spending. Most of the apps will summarize the information in categories which makes the analysis easier. Analyse where each coin of your hard earned money goes to and ask yourself the following three questions
- Is what I spent my money on, a need or a want?
- Does it align with my plan/Am I happy with my spending?
- What can I do differently next month?
Write it down and make it our goal for next month.