Are You Tired of Hearing the “Track Your Spending” Mantra?

Ask for advice on getting your finances under control or on getting out of debt, and chances are excellent that people will tell you to track spending as the first step.

I’m prone to suggesting that myself, because tracking my spending was one of the pivotal points in changing my own financial future. But…tracking every single thing you spend money on seems like an awful lot of work, doesn’t it?

You have to gather all those receipts, bring them home, write them down or enter them into some software, categorize them, and then review what you’ve entered. If you have a significant other, you’ve got to get them on board too. So you might have to get their receipts as well and go through the whole process, or find a time when both of you are available to go through everything. And then what if you forget something?

Tracking your spending is an easy thing to talk yourself out of.

I was resistant to it at first myself for a completely different reason. I wanted to get started on getting my finances under control Right. Now. I didn’t want to wait a month or 3 months or whatever the typically-recommended tracking period was. It seemed like a waste of time to me. And I knew where my money was going anyway. (Or so I thought.)

But, one day I read Your Money or Your Life and got so fired up that I figured I’d give the much-hyped “track your spending” thing a try. So I tried it the next day while on vacation. I just got out a piece of scrap paper, and whenever I bought something I wrote down a one-word description of what it was and the amount.

Now I didn’t even total up what I’d spent, create categories, or review the paper in any way. All I did was write things down and shove the paper back in my purse.

A funny thing happened when I spent the day doing that. I became much, MUCH more aware of my spending. Yup, those 5 seconds it took to make a note every time I spent some money were enough to get me to focus on what I was doing. 5 seconds of thinking.

Since then of course I’ve gone whole hog on tracking, but I’m a geek and I like poking around with that stuff. The point though is that even one day of tracking can make a difference, and it really takes almost zero effort. (Of course a month or longer will give you more data, but any data is beneficial.) And the answer to what if you forget something? So what. Try not to forget the next time.

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20 comments

  • I’ve never had enough discipline to follow through with a full fledged budget. What I do is identify an area that I have an obvious weakness (like lunch expenses) and create a quick and simple “Spot Budget” for that item.

    I have tried what you write about above where I just keep the receipts (actually opening my wallet, apparently I still do, lol). Then I’ll review then before I through them out. Sometime I shock myself that way… One of those “I can’t believe that I spend that much here…” kind of revelation…

    Someday, I’ll track my expenses more thoroughly. Probably when the kids get older hehe

    • Yeah, I’m not even talking about budgeting though. Just tracking for a single day. But I can see where reviewing the receipts now and then could serve the same sort of purpose.

  • I have had trouble keeping up with this system, as I’m by nature a cyclical person. Which means I’ll do great for a week or two and then it all goes to hell.

    So my current trade-off is that I watch our account activity online. Since we get checks weekly, I end up reviewing transactions at least once a week — often more. This provides a much-needed reality check, from time to time. What I find funny is that it never fails: I look at the charges, then at the total amount spent; I think “Surely, there’s been a mistake.” Then I add it all up and sure ’nuff… I curse out loud. It is a good way to keep myself on track if I get a little lax in my spending attention for a week.

    This month, though, I’m starting out tracking with grocery expenses. I figure I can slowly expand into other areas. Small steps are important for me.

    • Abigail, I think a lot of people have trouble keeping up with a system of tracking, which is probably one of the common reasons why people don’t want to do it. Heck I still don’t feel like doing it sometimes. But you don’t need to do it for long periods to get the benefit. Even just a single day can be eye-opening.

  • Tracking your spending is great.

    Or, you can simply STOP all unnecessary spending. I came back from the depths of financial hell so deep, I wouldn’t wish it on anyone.

    And I never once tracked my spending.

    If you eliminate ALL unnecessary spending, there isn’t much left to track.

    However, it is stil an effective tool

    • David, eliminating all unnecessary spending would definitely work for getting out of financial trouble, but a lot of people think that they’ve done that already — when they might be surprised to see that they haven’t. At any rate for me the power of tracking is more about keeping aware of what it is that I’m doing, and making sure I end up where I want to be. (Although lately I haven’t been seeing the forest for the trees, which is another matter.)

  • I’m not much one on tracking my spending but when I have there is an iPhone app that makes it easy. That way it’s input right a way and I don’t have to remember to do it when I get home.

  • Great tip! There is something about writing things down that helps one become more aware.

    If we are talking about saving money, then one huge question to answer for yourself is why are you saving in the first place? That is do you have purpose for saving money? Even if you do want to save money to pay off debt, the next question is this: is saving money really the issue?

    It is my experience, that having more money or saving money is not the issue. The real reasons for why we do things have little if anything to do with money. Why need to understand the fundamental reasons as to why we are spending on things that put us in tough spot later on?

    Do you know why?

    Best,
    Tomas

  • Tomas, that’s exactly what it did for me: made me more aware. Then the effect of being more aware was that I started making changes. I completely agree with you that understanding the fundamental reasons for why we do what we do is important. For me, I think the reasons behind my spending on certain things is more about what’s missing in my life than about what I’m actually buying.

  • So funny you mentioned that book, I just got it and am reading it now. It seems to be an oldie but goody.
    I suppose an alternative to tracking spending might be to use cash for all variable spending: groceries; gas; coffee to go; that magazine off the rack. If you set a cash amount for the month and when it’s gone, it’s gone, it could be an eye-opener as to how many nickles and dimes you’re dropping throughout any given day.
    Of course, that wouldn’t work for people who grab $20’s at an ATM every other day like they’re going out of style…
    My husband and I tracked money for the first time about ten years ago, as we learned from Mary Hunt. We didn’t have any huge epiphanies, or find our “latte factor”, but it did make us more aware of each purchase as you described.

  • Budgets, had you read the book before? It’s definitely my favorite pf book. I have a terrible time knowing what I did with cash, although I guess I could assume I spent it on crap from the vending machines…

  • I am different here. I love tracking. I am tracking each penny I have spend from 2003 and I am still totally in love with it after 7 years. So obnoxious, right?

  • If you used credit cards you can typically download past transactions from the CC’s web site. One of my wife’s cards even sends her a spending summary at the end of the year. Alternately, you can check out your past paper statements.
    I think most people generally know where they overspend, but they don’t really know how much they are over spending. Knowing the amount can help motivate you to change.
    Even if you know what to change it can be difficult, especially if there are others involved. As an example my largest area of optional spending is eating out. I would be willing to give it up almost entirely, but my wife loves to eat out. I can’t drastically cut back without making her unhappy. She even prefers to go out even if I offer to make dinner! Instead I use strategies to minimize costs: choosing less expensive places, sharing meals, not getting beverages, appetizers or desserts.

    -Rick Francis

    • Rick, downloading data is a good method to use as well. For me I don’t quite get the same benefit though — for some reason it’s the act of actually writing it down or typing it in that really helps me. Not sure why…

      Maybe your wife enjoys getting away and being in a different environment?

  • I use Mint.com. I don’t personally type it that way, but I do go in almost daily and categorize my spending (is it groceries or baby care or utilies, etc) and it has truly been a great tool to both establish a budget (I can see where cuts can be made and what I typically spend for budgeting purposes) and sticking to it.

    It is so simple for me, as every penny I spend gets entered for me, making it easier for me, but I’m no less aware since I categorize everything.

    And the software is free. At first I had questions about security, but they have FAQs for that and I have had NO problems with it thus far!

    • Kaye, I really need to check out mint.com — at the very least to be able to form an informed opinion on it. I’ve heard lots of good stuff about it.

  • APF

    I am absolutely with you on how the exercise of tracking your spending has an immediate and profound effect on your spending habits. First, it gives you an idea of where your money is going. Second, if you know how much and where – you know if you’re over or under for the month on a specific category – which makes staying on budget something that happens at the point of transaction rather than at the end of the month.

    I really don’t think paper and pencil are the best way to go about doing this though – it’s just too much of a time constraint, which makes it distasteful – and therefore less likely for follow-through. I would recommend Yodlee or Bundle for online platforms or Quicken for a desktop solution in order to track your spending.

    Automatic aggregation and automatic categorization rules are a lifesaver. This way you just log in once a day (or week, up to you), quickly make sure all categories are correct, and you’re done! I do keep receipts from places like WalMart and Target and such, so I can break down the total into the proper categories but for the majority of transactions, it’s all automatic…which leaves more time for thinking about new ways to boost income or other places to cut costs :)

    • Software that automatically tracks your spending for you can be very helpful if you look at it frequently and evaluate the results. I guess it depends on how people use it though — waiting until the end of the month to review things isn’t as helpful as taking a look at things much more frequently.

      You’re right that most people don’t like to manually track things, especially not with paper and pencil. That’s why I suggested that a step in the write direction would just be to write things down as you spend them, and not total them up or categorize them. I found that even just doing something like writing down “Candy bar, $1” and then never looking at it again made me more aware of my spending. Kind of a step in the right direction thing…