If you are new to money management and personal finance, then I am sure you have come across the term Expense Tracking, if you haven’t, allow me to introduce you to one of the top-tips of the money management community, we swear by this thing and we love it almost as much as we love the “B-Word” #budgeting.
We all have an idea of who we are; for example I used to think I was an amazing dancer. In my head, I looked fabulous on the dance floor and then one day, I saw footage of myself dancing & honestly I have not watched anything more painfully hilarious since. The truth is that whilst I have some – read: very little – rhythm and I’m great at doing the 2-Step, anything else is beyond my abilities. Our personal relationships with money can be like this. We may all have an idea of what we are like financially but the reality of who we actually are can be very different.
That is why keeping an Expense log/ Expense tracker is so important, especially if you are just starting to figure out who you are financially. It is also a really simple way to keeping yourself accountable (more on this in another post)
The Starter Pack
The best thing about this tool – okay lets agree to call it the ET for now – is that it is super easy to create. All you need is a place to store information. If you are a proper millennial, this is probably your smart phone, but if you are old school like me, there is nothing better than good old pen and paper. Yup that’s it. figure out where/how you want to keep a record of all the financial transactions that you make and you are good to go.
If you are really fancy, there are several smart phone apps that can help you with logging your expenses.
The aim of the game is to document ALL the financial transactions that you make for a period of time. If you are just starting out, I recommend that you do this for 3 months – and no, that’s not too long. That’s all it takes. Make sure you do your best to record all your spending.
But Lydia, Why Must I Do This?
Well the short answer is because I said so HEHE – I joke, I joke.
But seriously keeping an expense log is essentially your financial mirror. You know how it’s important to check the mirror to see if your underwear is on show or if you have food/lipstick on your teeth before you leave the house? well your ET is your mirror. It shows you who you are & what your habits are financially – with no apologies, just 100% honesty.
Without this information, it is more difficult to become financially disciplined because you do not know and cannot see where you are being reckless/ irresponsible with your money. Having the record allows you to spot problem areas where you could be saving money or areas of spending that are emotionally charged. (Eg: do you go shopping every time you get upset? How many times do you go to the cinema a month?)
The log also keeps you accountable to yourself – I personally find that spending time reviewing what I spent money on helps me to plan my finances better. My budget is more accurate because I am not lying or assuming the figures. I know I eat out a lot so I don’t budget £25 when I know that in reality, the figure is closer to £100. My budget is honest, I am honest and I feel no shame. What do you gain from having a fraudulent budget? a big fat NOTHING! It’s a waste of time and effort. Respect your money, plan it realistically.
I can also spot problem areas & behaviour that I actively want to change. Like buying Haagen daz ice cream for £5 from the corner shop every week. £5!! IF we assume that I buy it for 30 weeks of the year, that’s: £5×30 = £150. ON ICE CREAM. Good Lord! am I crazy?
You see how it works now? keeping an ET is for your benefit, and if you are super nerdy like me, the idea of plotting all this information into an excel spreadsheet & creating charts and graphs with it just makes you as happy as Haagen daz cookie dough ice cream. (Low-key/High-key, Microsoft Excel is my boyfriend, it’s a secret though)
So if you haven’t started tracking your expenses, today is a great day to begin. Write down/record all your spending in a safe place. Record the date, amount and item of purchase then periodically check back on your spending. Find out who you are financially and take the necessary steps to be a better you.