5 Reasons to Track Your Expenses

One of the most important things you can do for your finances is to track your expenses.  For many people, this means using Quicken.  For me, it’s a simple Google Docs spreadsheet.  Whatever your method, there are countless reasons to perform the simple task of tracking your expenses.  5 of these reasons are listed below:

1. It’s absolutely the simplest way to overcome your paycheck-to-paycheck lifestyle.  Simply notice how much you are spending each month and budget $5 or $10 less for the following months.  Set this money aside as “padding” and eventually you’ll have a significant chunk of “extra” cash in your account.
2. It allows you to optimize your spending.  When you track your expenses, it will likely be blatantly obvious where the majority of your spending money is going.  For me, this has traditionally been eating out.  Simply notice these activities that are sucking up all of your money, identify a “fix”, and commit to it.  One of my previous fixes was to spend $100 less per month on restaurant food.  It worked.
3. It gives you control over your finances.  It’s impossible to have control over your money when you don’t know where it’s going.  Tracking your expenses is the ONLY way to finally get a handle on your finances.  This control gives you the freedom to do whatever you want with your money.  Want to finally afford those dance lessons you’ve been dreaming about?  Simply notice an expense you can afford to cut, take action, and apply that money to your new lessons.  It’s as simple as that.
4. It helps you avoid unnecessary overdraft fees. How many times have you overdrawn your checking account because you forgot about an outstanding check that had not been processed?  Chances are, if you are living paycheck to paycheck, you’ve done this once or twice.  It’s not fun getting hit with random $25 charges that could have been avoided.  If you track your expenses, this won’t happen.  Easy money.
5. It identifies ways in which you can save more money. How many of us have said that we would save more money, if only we made more?  Well, if you aren’t already tracking your expenses, I bet you CAN save more money than you already do, even though you might not yet realize it.  It’s easy to save more money.  Take a look at your expenses over the past several months, identify an expense to cut (cutting even $5 from that expense can make a significant difference), and set aside that amount every month for savings.  For example, maybe I could budget $10 less for gas every month, and apply that $10 to my savings account.  One way I could realize this goal would be to work from home once or twice a week.  Or maybe I could consolidate my grocery errands.  You get the idea.  How could it be any easier?

There you have it: 5 reasons why YOU should be tracking your expenses right now.  Can you think of anymore reasons?  I’d be delighted to hear your ideas in the comments section.  Thanks for reading!

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