Tracking expenses is the first step to knowing how you spend your money. Once you know how you spend your money you can evaluate if it is serving you. Knowledge is power. If you want to save more, start by knowing what you spend so you know where to cut spending.
Managing your finances without tracking expenses is like trying to use Google maps without data. You may know exactly where you are but latitude and longitude mean very little without the context of what street you are on.
Three things to do right now
- Keep all your receipts for a month (or use only your debit or credit card)
- Use a spreadsheet to record and sort all transactions (groceries, eating out, utilities, clothes, gifts, etc…)
- Evaluate the expenses. Were there any surprises? Is the breakdown what you expected? Or are you surprised at how much buying lunch adds up to.
Why track expenses manually?
There are many apps, systems, and even some banks offering to keep track of your expenses at minimal effort. However, with all that effortless tracking we don’t spend time learning about our habits. As you record each expense you can reflect on it. Was it a necessity or a luxury? A product or experience? It also let’s you categorize it, rent, car, groceries, utilities, eating out, drinks, clothes, etc.
Once you have a few months tracked you can make a budget, identify areas to cut back on, and have peace of mind that you are spending responsibly to meet your future goals. Even better you will now know how much you can save!