Why should you track your spending? It’s the first step to getting your finances in order. You can’t make a budget, adjust spending habits or set financial goals if you don’t know where your money is going.
If you have a general budget, but at the end of the month you’re still struggling to make ends meet, then most likely there’s a disparity between what you think your spending and what you are actually spending, possibly a huge disparity. You need to re-evaluate 2 main points: 1) Is your budget realistic in terms of your needs? and 2) Are you keeping to this budget? The only way to answer these questions is to keep careful records of how you are spending you money.
Once you’ve tracked your spending you may discover that small purchases made on a regular basis can really add up. Frequently small things like snacking, tolls or eating out are not taken into consideration when creating a monthly budget, but these little things can end up taking a chunk out of your income.
After getting a clear picture of how much you are spending and on what, it’s time for action. If there are some necessary expenses that are unaccounted for in your budget, then the solution is simple: include them in the budget and you’ll get a more practical idea of how much you need each month. However, if you discover a trend of unnecessary spending that is eating up your budget, you need to modify your spending habits. This can present a challenge.
Changing small spending patterns is easier said than done. However, Charles Duhigg in his book the Power of Habit explains how one study showed that those who curb their spending behavior “strengthen their willpower muscles” and can see positive results in all aspects of their lives. So, don’t view tracking your expenses and keeping to a budget as a boring restriction; see it as an opportunity to identify ways to reduce your spending and acquire self-discipline.