One of the first rules of getting your finances under control is generally to track your spending. It makes you aware of what you’re spending, and which are the easiest places for you to cut back. Do you have a sweet tooth? Are you spending 2000 bucks a month on take-out when you should be paying off your debt? Do you love buying a little something when you’re out?
FIRE and money management
I have a confession to make – I never used to tracked my spending earlier. Well, that was till I started my FIRE Journey way back in November 2019. From then to now, I have been over tracking it and it is amazing how much I have learn’t and saved during this time.
Both these apps do an amazing job of tracking the money I receive, how much I need to pay and how much I have paid.
Reasons to not track your spending
There is absolutely none. Perhaps you are lazy, then again I will not go as far as calling that a reason to not track expenses. It is more of an excuse towards poor money management.
Reasons to track your expenses
Know where your money goes
You will start realizing where you spend the most of your money once you start tracking your expenses. This ultimately will lead to cutting of killer expenses that add little value to you.
Curb unnecessary expenses
Tracking gives you a level of awareness on your money, letting you know what you can do without.
More accountability with money
Tracking gives you a lot more accountability with the money you have. Now you know it is being tracked and monitored. Tracking gives you an inner rudder that controls how freely you look at money and account for it.
Avoid splurging and impulse buying
Tracking your expenses and keeping an account of spendings will act as an anchor that deters you from impulse buying and splurging.
Budgetting vs Tracking expenses
Budgetting is the act of setting aside a portion of your money to be spent over a defined period of time. Tracking on the other hand is a simple act of keeping a note on paper or excel or an app on where you spend how much money.
The two go hand in hand, however budget is more at a higher level, while tracking looks in detail at your expenses.
How to track spending and expenses
There are a number of ways you can do this. Here are a few pointers
Books vs Excel vs Apps
Track expenses on a Book
Some like to do this old school. Get a notebook, nothing fancy. Start keeping track of the expenses for the month on it. Start a new month on a new page. You dont really need to capture minute details. The following information should be enough:
- Where you spent the money
- How much you spent
- Date of the expense
- Category (Food/Entertainment/Fuel/Education etc)
Tracking expenses on Excel
This is more digital and excel makes it easier for you to analyze at the end of the month. You can quickly sum up, put up a chart, use formulas etc. Plus I personally prefer this method as it gives you a lot more flexibility compared to Apps and is a lot easier in terms of analysis compared to pen and paper.
Using expense tracking apps
The other option is, you could use an expense tracking app such as CRED or Walnut. These make your job much easier and keep track of expenses as and when you spend something digitally. That is, if you use a card then you get an SMS, these apps keep track using the messages you receive.
So if your spending is in cash, then you will have to manually add to the app later.
Immediate vs End of the month
Keeping track of expenses day to day
Keeping track of expenses on a daily basis can be a bit too tiring. This requires a lot of discipline which many may not have. If you can, then go for it.
For if you are regular, you would not miss out any expense. Even better is you are aware of where you stand on the day and can do course correction depending on your budget.
Tracking spending at the end of week or month
This is the alternate option. Jotting down and reviewing your expenses at the end of the week or month can be less tiring. But you may stand the risk of coming to know you have exceeded your budget after it has happened.
Laziness and going overboard
Laziness is one of the major factors why most people do not have good money management practices. Try to understand what you stand to gain by keeping track of your expenses. Once you are aware, it becomes a little easier and you are more motivated to stay true to what you hoped to achieve.
You need to keep track of what you spend, but if you go overboard and complicate things, you are making it difficult for yourself. Sooner or later you will stop following it. So avoid tracking things too minutely. You most certainly do not need to keep a track of every item you buy at the supermarket!
Analyze and improve
It’s good to do retrospectively, from time to time keep an eye on where your money is going (especially if it results in going, I’m getting charged how much for what? We need to get that recurring bill down!). We don’t do it regularly, though it is helpful to have CRED and/or credit card/bank etc. bills so we can make decisions like, “Can I take next year off? Can we afford this expensive thing?”
In my case, tracking my food helps me keep my weight under control and tracking my spending helps me keep my money under control. I have times where I get busy and forget to do both and it definitely shows on my body and in my bank account.
Do you track your spending, or do you do what I used to do and have no clue where your money went?