Earning money is one side of the coin and handling the expenses is the other side, to maintain a healthy prospect of your budget you need to maintain the cash flow in positive and for that you should be spending less than what you earn (simple logic, but hard to follow). Tracking each and every rupee you spend will help you to know where you are flipping your money, and in addition of knowing your expenses tracking your money have other benefits as well and here I am going to talk about the advantages of tracking expenses.
Advantages of Tracking Expenses & Bonus Tips
You Know What You Spend
Logging your expenses on day to day basis will help you to track each of your spends and you will get to know the areas where you are a spending more which can help you in maintaining your budget. Not only that if you don’t have a budget in place, tracking your expenses help you in drafting a budget that suits you as per your spending habits. Knowing what we spend is the biggest advantage of tracking expenses.
Helps You To Maintain Discipline
Tracking the expenses will help you in keeping you diligent while handling your spends as looking at your finances will make you conscious about money and it can potentially prevent a crisis before starting if you react the right way.
Improve Spending Habits
Say after few months of tracking your expenses, you will have a fair idea on the areas where you are spending more and you can take steps to improve your finances if spending money on one of these identified areas is not really required. Personally I am able to cut down my spending on food by large extent after I start tracking my expenses as I realize that I am spending huge money on dining.
You Can Manage Your Budget
If you are a kind of person who follow tracking your expenses & earnings religiously, you will get to know your cash flow and not only that you will have no other need to maintain a separate log book for handling your investments or debts as all these savings/expenses can be logged in your expenses book with a friendly note defining the purpose of your expenses, for example if you have allotted Rs. 10000 per month for investment in mutual funds it can be categorized as savings in your expenses log. Logging your expenses categorically like I have mentioned will help you in making your budget and no separate ledger is required for doing the same. For your information, there are few apps which have in built budget module as a feature.
Track The Unexpected!
Expense tracking have the advantage of tracking the unexpected, okay good but what the hell is tracking the unexpected? Let me explain it with a real life example I have experienced, recently I have been to a petrol bunk and asked the attendant to fill petrol worth Rs. 200 and at the time of bill payment instead of handing over Rs. 200 which I am supposed to pay I have paid the attendant Rs. 600 (1 Rs. 500 note & 1 Rs. 100 bill), no noise is made by the attendant and I have left the bunk on completion of this transaction.
At the end of the day when I started filling the expenses I have found that Rs. 400 is missing from my wallet and eventually realized that I have made a wrong transaction at the petrol filling station.
Well, I may realize this mistake even if I am not tracking my expenses but the chances are great that I may not realize the same if I don’t track them. Although I felt sorry for losing money for not being careful, going through this experience have made me realize the other side of advantages for tracking my money.
- Most of your expenses are not constant and will fluctuate each and every month, you will get the right picture only after averaging your expenses for few months.
- In case if you are left with extra money, you can adopt an investment/debt servicing strategy for handling your future purchases (can be your short term goals) or for making extra payments towards your debt.
Between Us: The advantages of tracking expenses can be even more I request you to share the advantages you have realized by tracking your money and also I would like to know how you are handling your money. In case if you are not tracking your expenses I suggest you to make a start now to experience the benefits.