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One of my 2017 new year resolutions was to track what I spent for a whole year. So starting January first I download an app and started tracking my spending.
Actually tracking what I spent was hard and often times I didn’t want to do. I didn’t want to know how much I spend that month.
Overall it was a great experience and taught me a lot of lessons about my money management. So here are a few reasons for everyone to track their spending.
Know where every penny goes
Knowing where every penny of your money goes is an eye-opening experience. It shows you the real picture of what happens with your money which makes it harder to hide behind excuses.
Maybe you been trying to save more but never could because you weren’t earning enough so you gave up. When you start tracking every penny you see exactly where your money went.
So that month you couldn’t save you might have spent a lot of money on other things like eating out and clothes. It makes you realize I do have to money I’m choosing to spend it on other things instead of saving.
Personally, I track my spending in YNAB. It even gives me reports showing where most of my money is going.
It shows patterns over time
I was confident going into this year of tracking my spending I knew where my money was going. Okay so it was kinda rough but still, I know how much I spend on certain things right? Turns out I was wrong about my spending.
The numbers in my head did not match up with reality. I thought I would spend the same amount of money every month no matter the category. And while that worked for some things like gas it didn’t work with others like clothes.
I thought I bought clothes every month and occasionally spent more if I need a new coat or something. That wasn’t how I was actually shopping. It was more me spending $300 in one month than when the season changed then spending maybe $20 for the next few months. I would cycle through with spending $300 with the season change and only spending $20 the next few months.
Once you start tracking your spending patterns start coming out.
Make it easier to start budgeting
Oh, budgets I like budgets and tracking my spending was one of the reasons I started budgeting. With tracking my spending it was all looking backwards.
At the end of the month I would think why did I spend so much money, I should have saved more. A budget, on the other hand, is looking forward and saying this is how much I will spend.
My very first budget was based on the numbers from tracking my spending. Which made budgeting easier. All I had to do was play with the numbers a little but it was doable.
Another reason for budgeting was so I could save more. Since I knew where I spent the most I also know where it would be the easiest to cut.
Tracking my spending played a huge role in how much I budget today. My first budget worked because it was based off real numbers so it was doable even if there was a learning curve.
If you are wondering how to budget check out my post on how to start budgeting here.
It makes spending hurt
This was the best and worst part of tracking your spending. You know how it feels different paying for something in cash or paying for it on a card. If you manually track your spending you get the same feeling no matter how you pay.
It makes you very aware of your spending. It got to the point where I didn’t buy smaller things because I didn’t want to enter them into my tracker it hurt too much. Even today I manually enter everything into my budget so I don’t lose that feeling.
At the time I used an app. If you don’t want to do everything on a phone you could use a journal as well.
So there you have it folks all the lessons I learnt from tracking my spending and the reasons I still do it. If you are up for a challenge try to track your spending for a while it a great way to learn how you really spend your money.
Because the picture in my head was completely different from what happened in reality. So use this to get in touch with the reality of your spending.
P.S. If you want to take the next step here how to set up a budget for beginners.
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