Tracking your spending can have some significant advantages. Here are three of them.
Do you know where your money goes every month? Unless you have tracked your spending, there’s a good chance that you don’t.
While you may have a vague idea of what you do with your cash — and know what your big monthly bills are — it can be hard to get a clear understanding of exactly how your money is distributed on a daily basis until you keep track.
Tracking spending can be done manually by writing down every purchase you make. Or you can use apps such as Mint that you link to your credit cards and bank accounts to make the process easier. Whatever approach you choose, it may seem like a hassle — but it’s well worth it in the end.
Not sure why you would want to go to all the trouble of tracking every purchase? Here are three major benefits of tracking your spending.
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1. You’ll spend more mindfully
When you know you have to write down every purchase you make, you may think twice about some of your splurges. The simple act of recording the transaction is often enough to make you change your behavior and be more responsible with your spending, just as keeping a food journal and counting calories can help you eat better and lose weight.
2. You can identify problem areas
As you track your spending over time, you’ll get a better idea of what’s happening with your cash. This makes it much easier to see where you are spending too much of it.
Many of your daily expenses may seem really small when you are charging just a few dollars here and there on a credit card. But once you add up everything you spend on dining out, coffee, lottery tickets, or whatever your indulgence is, you may be shocked to find out how much your habits actually cost.
3. You can make a better budget
Many people try to make a budget without tracking their spending first, but this is just setting yourself up for failure. After all, if you are wildly unrealistic about the amount that you allocate to entertainment or dining out or other discretionary expenses, you’re very unlikely to be able to actually stick to your budget.
If you’ve tracked your spending and have an idea where your money is going, you can make smart and sustainable cuts in desired areas. You’ll be far more likely to keep on budget over the long term if it takes your current habits into account from the outset.
Get started tracking your spending today
As you can see, there are lots of big advantages to tracking your spending that make the process worth it. Get started today with tracking your purchases. You’ll likely be surprised at some of your expenses. And hopefully with this new information you’ll be able to find ways to reduce your outflow so you can use your hard-earned money more effectively towards accomplishing your financial goals.
View more information: https://www.fool.com/the-ascent/banks/articles/3-benefits-of-tracking-your-spending/