How much did you spend on groceries last month? On gas? If you are like most consumers, you might not be able to answer — only one in three Americans track their spending.
This is a missed opportunity. Knowing how to track your spending brings financial awareness, which is essential if you want to grow your assets. Your daily expenses might not feel like a lot, but keeping track of them can shine a spotlight on bad habits, such as eating out every day or heading to the mall on a whim. Understanding where you can cut expenses can help you save money and build wealth.
Tracking your spending is the simple task of documenting every purchase you make in a day, from a coffee to the electric bill. Today’s tools afford us options for tracking: good old-fashioned pen and paper, mobile apps, or smart worksheets such as Tiller that allow users to create a custom daily spending spreadsheet.
Different methods will work for different people; the only thing that matters is that you commit to tracking every expense for a window of time, such as one to three months. You will see which purchases are essential (such as rent, insurance, utilities) and which can be cut (such as premium cable, drive-through coffee, and take-out). With that knowledge, you can begin to change your habits.
Finding your method for expense tracking is only the first step; however, you have to stay smart about tracking your spending if you want to grow your finances. These tips can help:
Before you shop, do research on what you are buying. The majority of consumers might not be tracking their spending, but they are doing research. The Ecommerce Foundation’s “United States Ecommerce Country Report” found that 88 percent of consumers in 2017 researched purchases before buying. The extra effort is worth it—you will know you are getting the best price for a purchase.
A budget keeps your daily spending spreadsheet in check by setting limits. If you are not sure what type of budget to create, do a self-assessment to point you in the right direction. The type does not matter as long as you create one that works for your lifestyle. And once you have created it, stick to it. Many create a budget only to fall victim to impulse buys—you get carried away, and suddenly there goes a chunk of money that was meant for necessities. It might feel challenging but staying true to your budget gives you more control over your spending.
Everyone needs two “best friends” in the finance world: an accountant and a financial planner. An accountant specializes in advising on financial matters and helping you file taxes, while a financial planner will be your go-to resource for understanding how to manage your spending and grow your finances. Both are important aspects of tracking your spending and managing your wealth, so when you are ready, find the best friends who suit you.
The best time to start learning about personal finance is yesterday. Half of American households live paycheck to paycheck, and if that describes you, know that you deserve better. Start small by tracking your spending, creating a budget, and seeking help from financial professionals. And if you are still feeling stuck, Cathay Wealth Management is here to help.
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