The importance of tracking your expenses
24 Sep 2021
Monitoring your monthly expenses is key to gaining an accurate picture of where your money goes and help eradicate wasteful spending habits. Tracking your expenses will also help you to keep control of your finances, making saving and investing easier.
Let’s look in more detail at the importance of tracking your expenses each month.
Look closely at your account statements
Monitoring all of your bank account and credit card statements each month will enable you to see your spending habits and determine whether you’re exceeding your monthly budget. By becoming more financially aware, you can rectify bad spending habits and replace them with better ones. By tracking your accounts, you may rediscover online subscriptions you no longer use but are still paying for, as well as other areas of financial waste that can be eliminated. As well as saving money, you can free up more cash for investments, thereby improving your money management.
Group your expenses
A major factor in tracking your expenditures is categorising them into several groups. This allows you to get an overview of your overall expenses; have a better understanding of your spending behaviour and determine ways to take proactive steps; monitor expenses and identify spending patterns; and have a better grasp of your current financial situation and amend your budget to focus on reaching your long-term objectives.
Your budget will contain fixed and variable expenses. Fixed expenses such as mortgage/rent, insurance, utilities and debt payments are less likely to change each month, whereas there’s more room for adjustment with variable expenses such as travel, food and clothing.
Avoid impulse spending
Impulse spending can have a long-lasting negative effect on your finances, so the closer you monitor your expenses the less likely you are to make impulse purchases. Your financial well-being will likely become a much bigger priority if you are tracking your expenses regularly. Should you see something you would usually purchase as an impulse buy, by tracking your spending you tend to stop and think more in regard to your overall financial picture.
Monitoring your spending helps to avoid debt
Being in debt can include costly interest payments as well as the debt payments themselves, depending on the type of loan or credit card debt you have. The amount of debt you pay each month can often be overlooked, so by monitoring your monthly spending, this can help you focus on ways to eliminate your debt as soon as possible and improve your spending habits.
Tracking your expenses can help you reach your financial ambitions
Everyone has goals for the future, whether it be retiring early, travelling or a luxury purchase. Yet although the majority of our financial goals depend on money, it can be hard to know how much you’ll need or save each month to reach your goals. As such, by tracking your spending, you get a clearer picture of how much you’re earning, spending and saving. So, if faced with any unplanned expenses, you can make the necessary adjustments to get on the right path to achieving your goals.