It might be a common thing to think that tracking your every expense is time-consuming. But all this effort will pay off to a better understanding and management of your finances. Let’s do a rundown of the advantages of keeping tabs on your spending and some ways to do so.
Why you should track your expenses
1. It allows for better planning for the future
Tracking your expenses helps you prioritize spending, track your results, and see what changes you need to make to achieve your goals and create the financial future you want. It also enables you to build an emergency fund, giving you a cushion to fall back on during unexpected events.
2. You’ll become less impulsive
Keeping tabs on how you spend your money gives you a clear picture of how much you’re taking out of your pocket. From there, you can identify the problem areas and cut unnecessary expenses.
Before buying something, ask yourself, “Do I really need this thing, or am I just trying to keep up with my friends on Instagram?” You may be splurging more impulsively than you realize, using funds initially earmarked for more important things. If you track your expenditures, you will be prompted to observe conscious spending.
3. For couples, it helps facilitate a healthier relationship
According to a survey, 36% of couples reported that money is the biggest source of stress in the relationship. It follows that when you get your financial affairs in order, you have one less thing to worry about. Money talk with your partner is one way to eliminate the stressor caused by issues that arise from mindless, unorganized spending.
During this check-in, you get to review your budget and progress on your goals, noting what went well and what needs to be modified. This will allow you to make compromises as a couple, guiding you toward the financial future you desire.
4. You’ll feel less anxious about money
Monitoring your spending also allows you to control your money, as it gives you an idea of how it is being disbursed. This awareness can help you decide how to spend your funds better, paying attention to those areas that need to be prioritized.
When you feel secure about your finances, you will feel less worried about settling your bills and other expenses. This helps reduce stress and anxiety, giving you a more positive outlook on life.
5. It helps you save more
If you’re tracking your spending, you can assess which purchases are necessary and which ones are not. For instance, you may find that you’re no longer using some subscriptions you signed up for a long time ago. As you run through these costs, promptly cancel all subscriptions you no longer need. For other charges, make sure they find a place in your budget.
How to track your expenses
- Find the most convenient budgeting method for you
There are various budgeting approaches you can choose from depending on which is the most convenient for you. One common strategy is the 52-week money challenge, in which you put money into a piggy bank or jar weekly in increasing amounts. Another technique is the 50/30/20 rule—you divide your income into 50% (for wants), 30% (for needs), and 20% (for savings).
Perhaps the six-month rule is a favorite among financial experts. Using this method, you can secure some savings by setting aside three to six months’ worth of living expenses. This allows you to have resources to cover costs in times of crisis.
Another way of doing this is by availing of a savings plan, in which you tuck away a certain amount from your income to build an emergency fund.
If you’re on the technological side of things, there are apps and tools available to help you track expenses. These are designed for on-the-go money management, giving you quick updates about your transactions.
- Set spending limits and stick to them
This is an essential step in tracking your expenses. You may find that you have gone overboard with your budget and need to transfer money between spending categories. Take the time to assess your current spending and adjust the limits accordingly to save up enough funds
- Know where your saved money will go (emergency fund, savings account, payments, etc.)
Take an inventory of all your charges, debits, and transfers so you can identify where your funds are being channeled into. Getting a sense of your monthly cash flow—what’s coming in and what’s going out—will guide you in building a secured financial safety net.
- Cross-check with financial goals
In tracking your expenses, don’t forget to cross-check with your financial goals. Are you close to completing that amount you intend to use for your Europe tour? Or are you almost done saving up for that phone you’ve been dying to purchase? Make an assessment and check if your expenses align with your target, and if they don’t, make the necessary adjustments.
- Adjust different spending categories according to your needs
One key to quickly build a savings fund is to spend according to your needs. You may find that your morning Starbucks run is costing you a lot. Or maybe you’re piling up newly bought clothes you’re not using. Modify your spending habits based on your needs so you can allot more money into your savings account.
Tracking your expenses will go a long way
Keeping tabs on your spending enables you to prioritize and save more funds, helping you secure a brighter future. There are several ways to track your expenses, and in doing so, you get closer to reaching your financial goals.
BPI AIA offers flexible savings plans to help you save for the future. Talk to a Bancassurance Sales Executive online today to get started.