Money is a necessary tool needed for day-to-day transactions and for generally making life better. In our daily activities, we have several needs that can be met with money.
Also, due to technological advancement, there are several outlets which aid the efficient spending of money.
So it’s no surprise when at the end of the month, you’re broke, wondering where all your money went. No, your money didn’t pull a disappearing act on you. You didn’t keep track of your expenses.
To avoid confusion, you should daily keep track of your expenses. Record your spending in a notebook or spreadsheet at the end of each day.
Accounting procedures, spreadsheets, and dealing with maths might be confusing, and that’s normal.
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By tracking your spending daily, you get to know your cash flow – what is coming in and what is going out. At the end of the month, you’ll be able to total everything up.
Keeping track of your expenses helps to identify and terminate wasteful spending habits. It helps you to firmly take the wheels of your finances. It also encourages healthy financial habits like saving and investing.
To make things easier for you when you record, expenses can be divided into three. They are fixed, variable, and periodic expenses.
- Fixed expenses: These require monthly payments e.g. rent, insurance, etc.
- Variable expenses: These vary weekly or monthly e.g. utility bills.
- Periodic expenses: These don’t occur regularly e.g. gifts.
Why You Should Keep Track Of Your Expenses
- To know where your money goes – You work hard for your money, you should be aware of how you spend it. This prevents the usual end-of-the-month confusion. It also helps you to prioritize your expenses and cut back on items you don’t need.
- To keep your finances organized: Prevention is better than cure. It’s better to be organized than to sort out a financial mess such as debt. Go with online expenses tracking.
- You’re able to hold yourself accountable: When you record your expenses, you become focused and work towards achieving a financial goal such as saving money to start up a business. This way, you cut back unnecessary spending and save more.
- It offers financial security: When you keep track of your bank transactions, subscriptions, etc. you’re able to quickly notice any fraudulent activity that might happen and stop it from the beginning
- It helps stay focused: As you keep track of your spending, you’re making a conscious decision to improve your financial well-being, save yourself from financial stress and avoid impulsive spending.
- It helps to avoid debt: No one loves to pay debt especially with the interest that comes with it. When you don’t record your expenses, debt piles up without you even knowing e.g. when you overcharge your credit card.
It can be overwhelming to keep track of your expenses, but in the end, it’s always worth it.