Do you track your expenses on a daily basis? For many people, the idea of logging every transaction into a personal budget sounds like the world’s most boring, insignificant task. But truthfully, there are a number of critical benefits. So, why should you track your expenses?
In short, the main reason you should track your expenses is to identify and eliminate wasteful spending habits in your financial life. Moreover, consistently tracking your expenses will help you maintain control of your finances, and promote better financial habits like saving and investing.
Honestly, there are quite a few benefits to keeping track of your spending behavior.
So, if you’re struggling to find a reason to track your expenses, you’re in the right place. In this article, I am going to provide you with 10 of them.
Let’s get started.
1. Maintaining Financial Control
When if comes to personal finance, being out of control is not something anybody would strive for. There’s nothing financially worse than feeling like you don’t have any idea what’s going on with your money.
The good news is, when you make an effort to record every financial transaction you make, you are essential, taking the reins on anything and everything involving your money. At any one time, you will know exactly how much money is sitting in your bank account, and how much you can spend.
In other words, when you track your expenses, you take complete control over your finances.
2. Holding Yourself Accountable
If you have any plans on saving, investing, getting out of debt, or building wealth, what is holding you accountable. I mean, we can all set financial goals, and have financial dreams, but if you aren’t tracking your expenses, there is nothing to hold you accountable when you make a bad financial decision.
Tracking your expenses holds you accountable for your future financial goals. And in the long run, that can be the difference between broke and wealthy.
3. Tracking Your Financial Progress
In addition to holding yourself accountable, tracking your expenses on a day-to-day basis helps you to see your progress on the road to your financial goals. Sure, there may be times when you need to answer to yourself for a bad financial decision, but keeping track of your positive progress is just as important.
Think about it, if you have a goal of saving $25,000 in a year, and you track your expenses every day, you can celebrate all the little wins along the way. For example, if you forego an expensive dinner out, and instead, cook food at home, tracking your expenses will help you see the impact of that decision in regards to your savings goal.
Additionally, tracking your progress helps to keep you motivated on the way to your goals.
4. Keeping Your Finances Organized
Throughout my life, my dad has had a saying, ‘it’s easier to keep clean than to make clean.’
What he means, is that in any area of life, it is easier to stay organized than it is to organize a messy financial situation. And this saying has guided me throughout my life.
In short, disorganized finances lead to financial problems. Whereas, if you spend 5 minutes logging your expenses and looking at your bank account every day, you are much less likely to let anything slip through the cracks.
5. Improving Your Financial Security
If you go weeks, or worse, months without checking your bank account, and logging your expenses into a budget, you are risking your financial security. What if somebody steals your debit card information and starts spending your money? That’s not a situation you want to find out the hard way.
In fact, as I’m writing this, I realize that this may be the most important reason for you to track your expenses every day.
Consider this, would you rather catch a fraudulent transaction in your bank account the day it happens, or discover somebody spent all your money after your rent check bounces?
Tracking your expenses every day is a small price to pay when it comes to your financial security.
6. Reducing Your Financial Stress
Ignorance in personal finance is anything but bliss. I mean, we’ve all seen those people that just don’t know seem to care about their spending habits. They throw every single purchase on a different credit card, finance brand new cars that they can’t afford, and end up buried under a mountain of financial stress.
All of this can be avoided with 2 simple steps: living on a budget and tracking your expenses daily.
The more diligent and disciplined you are about tracking your expenses, the less likely you are to make foolish financial decisions. And as you reduce your foolish financial decisions, you will reduce one of the leading causes of stress in your life: money problems. (source)
7. Finding Ways To Save More Money
One of the best parts about tracking your expenses is that you are likely to find wasteful expenses you can eliminate. For example, on multiple occasions, we have had friends tell us that when they started diligently tracking their expenses, they discovered they were paying for online subscriptions they had forgotten about. And that’s just one example.
In addition to unused subscriptions, you will probably find other areas of financial waste that you can eliminate. And when you do so, it opens up the opportunity to redirect that money into savings.
In my experience, when my wife and I are ultra-consistent about tracking our expenses daily, we save at least #100000-#200000 more than the months when we are a little lazy. If you extrapolate that over the course of the year, it can make a huge difference.
8. Reducing Impulse Spending
When you make a purchase without thinking it through or consulting your budget, it can have a long-lasting negative impact on your financial life. So, from what I have observed and experienced, impulse spending is the enemy of wealth.
Though, I have also learned that the closer you pay attention to your personal finances (i.e. track your expenses) the less likely you are to make impulse purchases. Now, I can’t be 100% sure why this is, but I have a theory.
When you track your expenses every day, your financial well-being becomes a much bigger focus and priority in your life. So, when you see something that you might otherwise spend money on without a second thought, you pause and examine it in the context of your overall financial picture. And that pause can be the difference between a foolish impulse purchase, and the decision to walk away.
9. Avoiding Debt
I don’t think it’s any secret that here at Be The Budget, we aren’t fans of debt. Though, to be honest, I’ve never met anybody that loves paying interest or making monthly debt payments.
Sure, they may love the car they financed or the expensive bag they put on a credit card, but if you ask them if they love making the payments on it, I can almost guarantee they will say no.
For that reason, tracking your expenses can be a powerful motivator to steer clear of debt.
When you are in debt, and not tracking your day-to-day expenses, it’s easy to let the amount of debt you are paying each month slip through the cracks, unnoticed. But, once you start tracking every dollar that leaves your bank account, you will start to add up the debt payments, and it can be eye-opening.
In fact, one of the original reasons my wife and decided to get out of debt — and stay out of debt forever — was because we started tracking our expenses, and were disgusted by how much money we were spending on debt each month. It was overwhelming, to say the least, but thank goodness we did.
10. Staying Focused
Every time you sign in to your bank account and start logging your expenses — even if it only takes a couple of minutes — you are making a conscious choice to focus on the well-being of your financial situation. And this small, consistent action can lead to powerful results.
Think about it, if you were to focus your energy every day for the next year on saving more money, how much do you think you could save? If you were to focus on getting out of debt, how fast do you think you could pay it all off?
Tracking your expenses may seem like an insignificant task, but it is a daily trigger for you to refocus on your goals, and keep getting better.
Do you track your expenses? What have you found to be the biggest benefit? Comment below. We love hearing from our readers!