When people first try to get a handle on their finances (or get out of debt) one of the top recommendations is for them to track their spending. Here are five reasons why doing so is so helpful:
Because you can’t kid yourself. “Oh,” you think, “we hardly eat out at all”. And then at end of a month, you’re forced to realize that you spent $378 eating something at restaurants. Maybe you DO eat out a little more than you originally thought.
Tracking automatically saves you money. There’s something about having to write down “$1, M&Ms” for 5 days in a row that makes you question the wisdom of getting a little bag of M&Ms from the vending machine each day. So you…stop. (Or you pick up a jumbo bag that’ll last a month for $4 instead.)
You identify the little (or big) leaks. Maybe you’d forgotten all about that subscription to World of Warcraft, and it’s just been automatically coming out of your account each month even though you no longer play. Maybe you had no idea that overdraft fees were eating you alive. Finding the leaks (and eliminating them) can painlessly save you money. In fact, it can make you feel pretty good.
It makes budgeting easier. Maybe you cringe at the word “budget”. Well, tracking your spending makes budgeting easier, because you won’t constantly be forgetting those easy-to-forget budget busters like Christmas, car insurance, wedding gifts, taxes, etc. Once you’ve been doing it for awhile, you’ll recognize the need for additional spending categories and begin to plan accordingly.
You begin to spend on the things that matter to you. Instead of letting money run through your fingers like water on things you don’t even remember, you begin to consciously buy the things that matter to you instead. In other words, your spending begins to align with your values, and you feel more satisfied with the things you do buy.