Last Updated on: September 20, 2023
Tracking your expenses is one of the more common suggestions in financial literacy, which you will hear from almost any personal finance advocate. However, only a few people really track their expenses.
The reason is that it’s harder to commit to it and will take years to master. Even I, who started tracking my expenses in 2015, still have trouble maintaining my consistency.
And it gets trickier when money changes hands (receivables and payables) or is transferred from one bank to another because of adulting responsibilities.
Nevertheless, even with the complications and challenges of fully implementing this strategy, it still benefits everyone who will stick to this habit in the long run.
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Reasons Why People Don’t Track Their Expenses
Like almost anything, there are also pros and cons when tracking expenses. Let’s first talk about why most people don’t track their expenses.
1. It is tedious.
Honestly, tracking your expenses is tedious because it requires effort (especially in the beginning) to incorporate into our daily life.
Just imagine remembering your expenses, reviewing your receipts, monitoring your bank accounts and credit cards, and checking every peso coming in and out of your funds.
Personally, I usually can track my expenses on any day, but everything collapses during the holidays and travels. It’s just too overwhelming to check the money in and out of my pocket.
2. It requires a lot of discipline.
Tracking expenses requires a lot of discipline because you must immediately write/input your expenses in your tracking system or lose the chance of recalling everything.
Thinking about this, it only makes tracking expenses a tall task, especially during holidays, travels, or lazy days.
3. It can sometimes be confusing.
Tracking your money on hand is fairly easy, but as our responsibilities change, so are our expenses, and having more accounts to follow gets trickier.
For instance, I track my expenses (and transfers) between my cash-on-hand, credit card, online payment platforms, brokerage account, and bank accounts.
I also have different budgeting categories, so I must track my expenses between them. So, it makes things confusing at times, especially if I forget to track each transaction immediately.
4. It takes time to master.
Expense tracking is a habit that requires a lot of practice to master. However, given enough time, effort, and consistency, you’ll also learn to track your expenses mindlessly.
But don’t get frustrated when you’re just starting. Look at me, I’ve been tracking my expenses since 2015, but I sometimes still get lost and confused now and then.
Reasons Why People Should Track Their Expenses
Now that we tackled the cons, let’s look at how tracking our expenses can be helpful in our personal finance.
1. It makes visualizing your financial status easier.
When you track your expenses, especially using expense-tracking apps or spreadsheets, you’ll get a clearer view of where you stand financially.
You can see which expenses are taking a lot of your income, which are unnecessary, and which essential expenses need an increase.
Some expense-tracking apps also have built-in trend lines and pie charts, making your expenses easier to visualize.
2. It reveals your spending habits and issues.
As mentioned in the first advantage, tracking your expenses will reveal where your money went. So, this is a great way to avoid money-wasting habits or build healthier habits.
For example, it can show you that you buy soft drinks almost every day for two weeks, and knowing that, you can consciously avoid it to preserve your health and save a few bucks in the process.
On the other hand, if you’re already committed to saving and investing, then your expense tracking will show a growing graph of your positive habit.
3. It instills discipline.
Tracking your expenses – large or small – requires a lot of discipline. That is why not everyone will stick to this habit because it forces you to remember where you spent your money, including your impulse purchases.
If done properly and consistently, this habit will overflow to different areas of your personal finances that will help you move forward.
It is also important to note that similar to the habit you need, there will be times when you’ll miss it. Just ensure that you never miss twice.
4. It helps you stick to your budget.
Our budgets place a ceiling on our expenses, so if you want to stick to your budget, you need to track your expenses.
You can set a budget ceiling for most expense-tracking apps triggered whenever you exceed your allotment.
Tracking your expenses will also show if your income is no longer enough for your expenses.
5. It reduces your financial stress.
Finally, you’ll lessen the financial stress by tracking your expenses and never ask where your money went again.
It will also allow you to be more mindful of your expenses and spend on important things.
However, there will also be times when you’ll get stressed with express tracking, particularly if you miss some days.
Expense Tracking Methods
Now that we learned about the advantages and disadvantages of tracking your expenses let’s move to the methods you can use. Here are four.
1. Pen and Paper
Pen and paper is a classic, and many people swear by it because this analog approach helps them track their expenses better than digital devices.
When using this method, you’ll have to constantly have a pen and paper (or notebook) at hand that you can use to write your expenses for the day.
Then at the end of the day, you can transfer your total expenses to your main tracker – this can be a different notebook or a spreadsheet.
2. Spreadsheet
You can also use a spreadsheet, like Excel or Google Sheets, to track your expenses. It is also more portable now and can always be available if you must list your expenses.
Since you’re using a spreadsheet, writing, editing, and computing your expenses is easier because of its many functions.
And if you’re tech-savvy, you may also create macros to automate your sheet or build graphs and tables.
3. Expense Tracking App for Smartphones
The third expense tracking method is using your smartphones. There are plenty of apps to choose from and download, whether you’re an iPhone or Android user.
Personally, I use the Money Manager App because it provides the convenience that I need and serves its purpose.
I also use a spreadsheet as my budget template and a mobile app for individual transactions—a spreadsheet for the macro level and a Mobile App for the micro level.
4. Expense Tracking for Couples
If you think tracking expenses is hard as a single, imagine tracking your expense as a couple or family.
This fourth method doesn’t necessarily apply to couples who don’t share their finances but is highly recommended for married couples.
Whether you’re using pen-and-paper, a spreadsheet, or a mobile app, you and your partner can agree on an expense tracking method that you both will update, individually and as a team.
- Pen and paper – you will each have a notebook where you will write your expenses and consolidate them at the end of the day or week.
- Spreadsheet – a Google Sheet will be more appropriate since it is already uploaded to the cloud, so your expense tracking will be updated in real-time.
- Mobile App – many expense tracking apps can have interlinked features allowing both parties to view each other’s expenses.
Key Takeaways:
- Tracking your expenses can be tedious and confusing and requires a lot of discipline to master, but eventually, it becomes easier.
- Tracking expenses helps you visualize your finances, reveal spending patterns and habits, and instill discipline.
- You can also use different tracking methods: pen and paper, spreadsheet, and mobile app.
What’s Next?
If you want to start your expense-tracking habit, here’s a challenge for you.
- In the next 30 days, list your daily personal expenses.
- Don’t include utilities, bank transfers, and other non-personal transactions.
- Just include your daily expenses like meals, transportation, and other small expenses.
- The goal is to incorporate the habit into your daily routine.
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