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Financial discipline is a prerequisite for money success. You cannot achieve your financial goals if you keep wasting money on nonessential purchases. Money is a scarce resource, and you should treat it with care if you want it to take care of you. Write down your expenses on a paper and stick to the amount allocated on the budget. Track your expenses so you know where your money is going.
Tracking money is beneficial in the following ways:
• Helps you reach financial goals faster
• Stops you from stressing about money
• Unites the family
• Helps you to measure progress
• Helps you get your priorities right
• Save for Emergencies
1. Achieve your Financial Goals
We all have dreams and ambitions. Your goals right now may be to save for a house or renovations. Saving money is a must if you want to reach your finance goal. You cannot save money if you keep spending it all. You need discipline to save. It starts with tracking money and knowing your daily, weekly, and monthly expenses.
2. Stops you from Stressing about Money
Interestingly, most people don’t know how much money they have in their bank accounts. They’ll estimate how much they have based on expenses they can remember. Since they’re not sure if the figure is correct, they’re always stressed about money. When you track your expenses, you’ll know how much money you have in your bank account and that will give you peace of mind.
3. Unites the Family
The reason why couples don’t talk about money is because they have different opinions on how the money should be spent. They also have individual financial goals that they hope to achieve with that money. Since the money is limited, they avoid talking about it because it can lead to a fight. When you track your expenses as a couple, it becomes easy for you to understand each other. That’s because you know how much money you really have.
4. Calculate Progress
How will you know when you have enough money to buy a house if you don’t keep track of the expenses? When managing money, don’t use estimates, use accurate figures. Keeping track of your expenses helps you know the exact amount that you spend and how much you can save.
5. Get your Priorities Right
We all need food, shelter, and clothing. These are things that you will always spend money on. However, they have a tendency of morphing into wants. Take the example of lunch at a fancy restaurant. It’s still food, but it’s also a luxury. Why should you eat at an expensive fancy restaurant when you can save money by cooking? Tracking money helps you know the extravagant expenses and get rid of them before they make you broke.
6. Save for Emergencies
With finance, you never know when you’ll need money. There’s something that’s referred to as emergency expenses. These are costs that you never expected, but have to take care of when they come up. Take the example of a sick relative or someone in jail. You have to help that person if they’re close to you. When you track your expenses, you won’t spend everything, saving money becomes normal to you, and it’s those savings that can come in handy during unexpected situations.
Tracking your finances is a continuous process. It involves you monitoring and recording what you earn and spend daily. Use the following tracking tips to check your finances:
• Figure Out How Much You Earn
• Create a Zero-Based Budget
• Put your Money in an Envelope
• Use Apps
• Use Spreadsheets
1. Calculate your Income
Managing money starts with knowing how much you earn. If you receive a monthly paycheck from your employer, you’ll use your paycheck to know how much you earn. If you’re a freelancer or entrepreneur, the process becomes a bit detailed. You should subtract your monthly business expenses from your revenues to know your gross income. Then, subtract taxation to get your net income.
2. Create a Zero-Based Budget
There’s more to managing budget than assigning specific percentages of your income to certain expenses. With zero-based budgeting, you assign specific values to your expenses. Then, you carefully subtract those costs from your income until you’re left with a zero value. The main advantage of using this method is that it helps you to justify costs.
3. Envelope Method
After you know how much you’re going to spend on different expenses, have an envelope for every cost. You can create an envelope for food expenses, rent, clothing costs, and bills. In each envelope, put the exact amount for each cost. When you go out for grocery shopping, carry the food envelope and spend money from that envelope alone. When that money is finished, you’ve exhausted your budget allocation on food. This is one of the smartest ways of managing budget.
4. Apps
Another way to track your expenses is by using your phone. Apps like Mint and Tycoon can help you manage your finances and keep your spending in check. The great thing about apps is that most of them have reminders that will help you remember to record your daily expenses. The apps also have an inbuilt calculator that gives you the total income and expenditure amount.
5. Spreadsheet
You can also use your computer to track down expenses. Use Excel to write down a list of your daily expenditure. Then update it at the end of the day. The good thing about spreadsheets is that you can update them every month. Spreadsheets also give you automated totals. The software can also generate a report so that you can see how your expenses have been rising or going down.
Use the above tracking tips to watch over your finances. Managing money will help you achieve your financial goals and stop worrying about money all the time. Managing budget will stop you from overspending. Getting used to the above strategies will take time; therefore, be patient and maintain the highest levels of discipline. Never let the day end without knowing how much you spent. Keep doing it until you get used to it. In the end, you’ll reap the benefits.