Here’s a shocking secret about money that regularly goes unnoticed: if you’re not tracking every dollar that you spend, you’re not really “managing” your finances. Crazy, right?
Australian money photo by Shutterstock
As personal finance blog Makin the Bacon puts it, rather succinctly, “You can’t change what you don’t measure.” If you’re trying to get a handle on your finances, but you can’t point to the specific things that cost you money, you’re not really managing your finances at all. If your “budget” consists of rent, a car payment and half a month’s pay of “miscellaneous”, you’re not budgeting. And until you actually start tracking every dollar, you’re fooling yourself.
Every time someone complains to me about their state of finances, the first question I ask them is this, “Do you track and record your expenses?” or “Do you know where your dollars are going?”. Most of the time, they will shrug and say, “No”. And there…right there you have it, the main problem with their finances is the fact that they’re not keeping track of their dollars.
Personal finance software, such as YNAB, give you all the tools you need to start tracking your expenses. Start by using them every single time you spend money. If Mint doesn’t work with your bank, create a spreadsheet. Write it in a notebook. Whatever works best for you. But don’t just glance at your bank account every few days and assume you know what’s going on.