Benefits of Tracking Your Spending

Benefits of Tracking Your Spending

Instead of budgeting, try just tracking your spending. It takes some time, but it doesn’t feel as confining as budgeting and often leads to the same outcome — spending less and saving more.

Tracking vs Budgeting

Tracking and budgeting are similar but not exactly the same. I think of tracking as monitoring and becoming more aware of how much I’m spending in each category. It’s recording and adding up how much is being spent on food, shopping, and utilities, etc. each month.

Budgeting on the other hand is putting a constraint on how much you are planning to spend in each category. It can be harder to stick to a budget and it can feel too restrictive.

The two often go together, but I find just by tracking your spending you’ll naturally start cutting back on things that are taking up too much of your income. People that are against the budgeting part may find tracking less confining and easier to make a habit.

Tips for Tracking Your Spending

  • Use an online app for tracking. My favorite is mint.com. You can link up your checking accounts, debit cards and credit cards.Don’t stress over the categories.
  • Sometimes people get bogged down with which categories to use but just get started and you can change as you go along.
  • Check it frequently. I take a quick look at Mint every few days and categorize any expenditures that did not get labeled correctly. It’s much harder if you wait until the end of the month!
  • I also use a spreadsheet for long-term comparisons. Each month I take the totals from Mint from each category and put them in a spreadsheet. I start a new sheet for each year.

Setting up a spreadsheet seems redundant but I have found it to be an important step. Inputting the numbers into a spreadsheet makes sure I’m taking it all it – otherwise you may just set up mint.com and never really take another look!

It’s also easier to customize a spreadsheet and compare the totals from month to month and year to year to see if there are certain areas of your spending that are increasing at a faster rate.

Making projections becomes easier too. Just make a copy of your spreadsheet for the current year and make any possible changes in spending for a future year.

For instance if you are thinking of renting a more expensive place, make a copy of your current spreadsheet and increase your rent to the new price. What other costs will be affected? For instance will the utilities, transportation, or household costs go up? Take a look and see how the numbers change and if you’ll have to cut back in other areas to make the numbers balance.

Even if you’ve given up on budgeting, try just tracking your expenditures to get a better picture of your spending habits. This may be all you need to start saving more.

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The content on this post is for information purposes only and is not intended to provide individual tax or financial advice. Readers are advised to consult financial or tax professionals for specific information regarding your individual situation. Opinions expressed herein are solely those of Balance Financial Planning, LLC, unless otherwise specifically cited. The content is developed from sources believed to be providing accurate information.

Balance Financial Planning, LLC

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cheryl@balancefp.com

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