With the move towards a cashless society, it’s becoming more difficult with each passing year to control your spending, especially on impulse purchases. When you swipe your credit card, you often don’t realize how much you’ve spent – that is until you receive your credit card statement. By tracking your spending it helps keep you accountable and live within your means.
Still not convinced of the benefits of tracking your spending? Here are four more reasons why you should consider tracking your spending.
Why Track Your Spending?
Reduce Excess Spending
Small daily purchases like coffee and lunch may not seem like a lot, but can really add up at the end of the month. For example, $30 spent on a meal out with friends on a Friday night may not seem excessive, but if you add up all your restaurant spending during the month, when all’s said and done you may realize you’re spending $300 a month – ouch! This can be eye-opening experience and help cut out any excess spending.
Getting a Good Bang for Your Buck?
Tracking your spending is a good exercise in seeing whether you’re getting good value for your money. For example, you may realize you’re spending $150 a month on a premium cable package, but only watching TV five hours a week. If that’s the case, you may consider downgrading to basic cable or cutting the cord all together. By going cable-free, that’s an extra $150 per month or $1,800 per year you can earmark toward savings.
Discover Grey Charges
Grey charges are those subscriptions that sneak onto your credit card without you noticing. They’re subscriptions that automatically renew. Here’s how they typically work: you get a free trial, but you’re asked to provide your credit card information. Once the free trial expires, you’re billed a recurring amount on your credit card unless you cancel by a certain date. Watch for these charges. If you’re no longer using the service, cancel them right away.
Meet Your Financial Goals
Do you always find you never have any money left at the end of the month for savings? It’s hard to meet your financial goals if you’re constantly living paycheque to paycheque. By tracking your spending and “paying yourself first” (adding a category for saving in your budget), you’re more likely to meet your long-term goals like homeownership and retirement.
What Steps Can You Take to Improve Your Finances?
Create a Budget
The first step and most crucial step is to create a budget. Those with a budget are more likely to live within their means and meet financial goals. There are plenty of ways you can create a budget: spreadsheet software, Mint.com and budgeting apps. Choose the method that works best for you.
Review Your Credit Card and Bank Statements
I know we live busy lives, but by taking the time to review your credit card and bank statements, you can find new ways to save. Not only that, you can reduce excess spending and spot any grey charges you may have forgotten about. You can also reconcile your spending to make sure you’re not going over budget on categories like groceries and dining out.
Use Subscription Management Apps
To avoid paying for a service you no longer use, consider signing up for a subscription management app. These apps keep track of how much you’re spending on subscriptions and makes it easier to cancel the subscriptions you’re no longer using.
Written by Sean Cooper
Financial Journalist and Personal Finance Expert
Author of upcoming book "Burn Your Mortgage"