Why should I track my money?
Tracking your money may seem like a tedious task – who wants to look in the past to see what’s already been done? You might be interested to note that your past is the best indicator of your future – and being able to see where your money is going can help you to see where your future money will go if you make no changes.
If you want to make changes to where your money is going, the first place to start is to look at where you have already spent your money.
1. It gives it importance
You think about your money more often, and it becomes front of mind for your brain. Your Reticular Activating System – that part of the brain that shows you red cars when you have just purchased a red car, or pregnant ladies when you are thinking about family planning, will show you over and over again because it’s important. If you are constantly thinking about do I need to spend this money, can I wait a little bit longer? Can I wait until next pay, can I wait until never – is there a different solution to this?
2. You are aware of your spending habits
You don’t just get your phone or card out and “tappy, tap, tap” – you start to think about your previous spending habits and if you want to continue on. I see this all the time with my clients, we make different choices just purely by being aware of what we’re spending.
3. You can choose “this” or “that”
I can choose to buy this now, I can choose to buy this later, I can choose to buy this never, and, only by tracking, do you actually understand how much this is going to give you back in your pocket.
So you can make conscious choices like I would prefer to spend $100 on eating out tonight instead of saving $100 towards my holiday.
Or it could be the other way around.
I choose to put $100 in my holiday bank account and eat the food that’s in my pantry instead. You’ve got lots of choices when you track your money.
Tracking those gives you an awareness of, can I make this work, can I afford to buy it now, can I live without it, if I choose to put it off for a week, if I choose to put it off forever, and it gives you that discretion, so that choice of how you want to spend your money.
4. You don’t need to track everything – just the things that matter.
For example, if you know you’re paying $500 a week rent, then that’s what you’re paying.
You don’t need to track that over and over again.
But things like groceries and fuel can go up and down significantly because the prices of these go up and down, and what you’re buying isn’t necessarily the same thing over and over. Tracking averages over time can help you allocate money towards those categories, and help to make sure you spend within you allocated budget amounts.
You can then set mini budgets and spending guidelines to certain categories – we have a bank account dedicated to groceries and fuel and transport (ubers and transperth). The reason for this is that all of these are dependent on use. How much we spend is totally up to us and we can spend less if we have to and will often spend more if the funds are there.
5. Tracking your savings can give it more momentum.
Saving for a holiday or a deposit for a new house or a new car, or something like that.
Tracking means that you can celebrate those small wins and keep your momentum going with regards to your savings.
Some of those things are quite big, so if you’re looking to buy a first house, you might need $120,000 to put a deposit down for a house, depending on how big that house is and how much it costs. But $120,000 seems a really, really, really long way away. Having a night off and going out on the town won’t hurt me in the long run, because there’s so much time to go to save that amount of money.
But if you’re celebrating and tracking every $1000 that you make, even if it takes you a few weeks to get $1000, then this keeps the momentum going and you are more likely to stick to your savings plan. Combine this with an allowance for some of the things you might blow your savings on, as a separate bank account, so you can stay true and realistic to your savings, and you will go far!
