So you’ve started budgeting and planning how you would like to spend your monthly income. Achieving financial freedom requires actively knowing and planning for your expenses so you live within your means and are able to put aside enough money for your savings and retirement. To do this effectively, you need to have a consistent method of tracking your expenses daily, weekly, monthly and over the year. This will help you figure out where your dollars are going and adjust your budget for different expenses, eliminate certain expenses altogether and ensure you are planning sufficiently for your future.
When you track your expenses over a few weeks, you’ll quickly start to notice your spending patterns. If you have not done it before, you might be in for a shock when you see some of the results. This can also happen if you haven’t been keeping track for a while. For example, your costs for eating out, your cable bill, gifts and entertainment, and shopping online can quickly add up. The only way to know how much you are spending is to track your expenses.
Spending is really personal. Instead of beating yourself up when you see your spending habits so far, just take the knowledge and apply it to your present and future spending choices. After you have paid external bills to third parties such as your rent, utilities, insurance, loan and credit card payments, the way you spend your remaining cash is entirely up to you. Only you can decide how you want to go about it, such as limiting expenses in one category or another. If you are married or in a relationship, you will want to have several serious discussions with your partner about spending and financial habits so you are on the same page and you live within a budget while still leaving room to buy additional things or go out for entertainment. (For related reading, see: The Spending Habits of Americans.)
What You Can Learn From Tracking Your Spending
The adage of “what gets measured gets achieved” could not be more apt than when it comes to your finances. By knowing what income is coming in and how you are spending it, you are able to learn more about your own spending habits and plan accordingly. You will also identify what expenses are necessary every month, such as your rent or mortgage, food, insurance and minimum credit card and student loan payments. You will know where you have wiggle room, like your utility or cell phone bill that you can lower by removing unnecessary add-ons. You will quickly learn how much money you’ve been spending on eating out and coffee shops and where you can save. (For related reading, see: 9 Ways to Trim the Fat From Your Spending.)
Tracking your expenses is essential if you want to master your finances and be in control of your future. While you can keep a print ledger or copies of all your receipts, there are several tools available online today that you can use that are more effective because they help you proactively plan into the future and pull all your information from your various accounts at one time. Mint and eMoney Pro are two powerful financial planning tools that will help you easily set up budgets and track your expenses.
You’ll be able to see your expenses over time and identify how you are spending your money. You can also set budgets for certain goals such as buying a house, paying off debt or putting away money for your retirement. Through proper financial planning, you can save a lot of money while you are working in the military and build a solid nest egg for when you come out. Tracking expenses will help you plan for all the important decisions in your life.
When you plan your finances, you plan your life!
(For more from this author, see: Why It's Essential to Create a Budget for Yourself.)