At the end of every month, you run out of cash and wonder where it all went. You decide you’re going to finally save this month. Before you start cutting expenses, track what you’re spending money on to begin with.
Photo by pshegubj.
As personal finance site Retire29 explains, if you’re not tracking your expenses, you’re going to have a hard time knowing exactly what to cut. It’s easy to feel like we know where the cuts need to be made. After all, any luxuries are obviously the biggest drains, right? Just eat out less and the budget will fix itself! If you’re spending exactly as much on groceries as you are on eating out, though, changing that won’t help. You need to track your expenses to know where your weak points are:
I’m going to assume that you want to feel in control of your finances. Stressing about money is not a good look. Control is the first step toward removing that stress, and knowing your numbers is the first step toward exerting control. Once you know what you’re controlling — expenses, savings, investments — then you can taking action.
Tracking every dollar can be tedious (though it’s easier if you use the right software) but it’s essential for knowing where you stand. If you can’t point to a specific area of your budget and objectively say “This is where all my money is being wasted,” you’re not ready to decide what needs to be cut.