My favourite exercise, above all, with my clients, is getting them to track where they spend their money and report back to me. Why? Because they ALWAYS learn something valuable. I have been tracking my expenses for over ten years – it’s a habit now, to the point where I can’t imagine not tacking. It wasn’t always that way. But somewhere along the way I figured if I preach it, I should practice it. I was also self employed for several years so was required to for tax purposes. The exercise has proven to be invaluable. It provides information that allows you to make decisions about your money and what is important to you.
Keeping track doesn’t have to be painful. You want to find a system that works for you, something not too complicated. You don’t have to track expenses for the rest of your life, but hopefully, you will realize the value, as I have, and want to make it part of your financial plan.
The following are five reasons why you just might want to start tracking your spending:
#1 You will know exactly where your hard earned dollars are going every month/year. That should be reason enough. You work hard for it.
#2 If you have a life changing event coming up (ie. a marriage, addition of child, purchase of a home, retirment) you can better evaluate how this will impact your month to month cash flow.
#3 You can change the way you deal with an expense (ie. decide to start buying bulk groceries to cut down) and easily and quickly monitor the results to your bottom line
#4 You can decide when it is time to make a major change (ie. move, buy a new vehicle)
#5 You can make a few small adjustments to several expenses and start saving for that goal you have been putting off
Hopefully these 5 reasons will get you started. Watch for future posts on how to best keep track and pitfalls to avoid.
Wishing you good financial health!