After years of perfecting the fine art of bargain shopping, my savings was growing at a snail’s pace. It wasn’t until I started to track my spending that my savings started to increase. Tracking your spending will lead to the biggest increase in your savings than all of your bargain shopping.
I remember when I finally determined to get my spending under control, I had set a very specific goal. I was very motivated to accomplish my goal and gain control of my spending once and for all. (You can read about the importance of having a money saving goal here.)
But when I first started this journey I was literally learning on the go. I knew I could save money at the grocery store by clipping coupons. Shopping clearance racks and thrift stores were my new favorite way to save on clothing. Restaurant websites were always checked for coupons before going out. Let me telling you, I was very motivated.
My poor kids got to the point that if my kids saw something they wanted before they asked if they could have it, the first question would be “mommy is this on sale.” I mean I was serious about cutting back.
I was definitely spending less on the items I was purchasing, but I still wasn’t seeing a lot of leftover cash at the end of the month. It was so frustrating for me. I was making lots of changes, but not seeing a big increase in my savings.
The problem was that even though I was getting some good bargains, I did have a clear picture of where my money was going. All of my bargain hunting did nothing to help know how much money I was spending in various categories at the end of each month.
One day out of total frustration I decided to start keeping track of everything I spent. Here is how this simple act helped my savings rapidly grow and you can have this same success.
1. Tracking Your Spending Reveals Your Spending Habits
When I first started tracking my spending I was more than a little shocked at just how much money I spent on clothes. I had really cut down on all purchases and when I was buying clothing it was at a bargain price. Despite this, I was spending way more on clothing than I thought.
While I had given up certain luxuries there were still things I was purchasing that were not in line with my goals.
When you track your spending you can clearly see what your spending weaknesses are. Knowing your weakness enables you to make changes to overcome them.
The truth is that if we have never tracked out spending, we have only a vague idea of where our money goes each month. While you may not think you are spending a lot, the numbers will show otherwise.
2. Tracking Your Spending Forces You to Prioritize
Because tracking your spending allows you to see what you are spending on you can also see whether your spending is in line with your goals.
For instance, after tracking my spending I really cut back on how much clothing I was buying. However, I did keep the amount being spent on my kids’ sports activities because those were really important to us.
But even here, knowing this was a priority, I still saw some places in this category that could be cut back. Instead of spending money on food the kids sporting events, I made some minor adjustments. I packed our food for the day or made dinner ahead of time and packed it to eat at the game.
Tracking your spending allows you to keep your priorities in order while cutting back in less important areas.
3. Tracking Your Spending Helps You Create a Realistic Budget
Sticking to a budget is tough, it requires self-discipline and sacrifice. If your budget is not realistic it will be next to impossible to stick to.
In fact, the number one reason people fail at their budget is because it is not realistic for their specific life. Each family is unique and what works for my budget may not work for you. If your kids hated sports or your job required you to spend a lot of money on clothing, my budget would never work for you.
Tracking your spending is going to show you what you need to include in your personal budget. You will also easily see what you can realistically eliminate.
4. Tracking Your Spending Helps You Make Wise Money Decisions
Tracking your spending ultimately allows you to take control of your money. You tell your money where to go, rather than the other way around.
Knowing where your money is going is the first step to taking control of your finances and finally being able to reach your financial goals.
Once you have tracked your spending you will begin to have a better picture of where you are overspending and where you can really cut back. You will find extra money to pay down that debt or save for that great vacation or other special things you’ve been longing for.
Now that you’re ready to start tracking your spending here are some great tips on how to get started:
- Keep a notebook with you and write down the amount you spend each time you make a purchase.
- Use Evernote on your phone to keep track of your spending.
- Use a simple spreadsheet or word processing document to enter your spending at the end of every day.
- Record every purchase, no matter how small the amount spent. The little things really do add up!
- There are a lot of apps out there, many free, that can help you keep track of what you are spending. Here are a few free apps that may help you.
Don’t worry too much about your fixed expenses, usually, you can’t do much about these expenses. These would include things like your mortgage or rent, car payment, car insurance, medical insurance, basically any expenses that do not change from month to month.
Your variable expenses are where your focus should be. Focus on keeping track of things like utilities, credit card payments, clothing, household items, groceries, entertainment.
Just a few minutes a day is all it takes to identify where your spending is not aligning with your goals. Once you have a clear and realistic picture of where your money is going, you can begin to figure out where you can cut back and start making some real increases in your savings.
As always, live simply, live fully and make today your Favorite day!