For the last few years, I can’t tell you how many attempts I made at sticking with a budget tracker. I’ve tried different apps in the past, to just just plain old Excel. Every time, I’d find an excuse that would justify quitting the tracker. Either the apps mis-categorized an expense, or there was a lag in updating the transactions. Excel was too inefficient to use, since I could only make updates when I was back on my computer. Etc. etc. But the truth is, I just didn’t want to face my spending habits.
Meanwhile, I was not happy with the amount of money I was saving each month. It seemed like it should be very straight forward: money in - money out = money saved. I had a fixed salary, so the first part of the formula was straight forward to plug in. But the second part was more of a black hole. Where was all my money going?
Being the data-obsessed nerd and Excel-tinkerer that I was, I decided to build my own budget tracker “app”, where I manually input each transaction. My goal for 2020 was to track every single penny that went in and out of my hands (or digital accounts). It didn’t matter whether it was a thousand-dollar purchase, or even a quarter that I paid for street parking. Everything went in the budget tracker.
365 days and 1,030 entries later, I had a colorful and fully completed dashboard
The biggest lessons learned:
1. 🔔 Awareness
If I could only share one takeaway, it would be this. The act of manually inputing each expense into my tracker made me so much more self aware of my spending amounts and spending frequency. It provided real-time feedback that no other tracking method could have given me, because inputting each purchase made me so much more conscious of each time I swiped my card. It was much more effective than using automated budget apps (i.e. Mint), because while they do track our spending, it’s much more passive and in-the-background type of tracking. If I noticed that I was inputting more expenses normal, I knew to proactively slow down. Other times, I’d find myself asking is it worth buying this and having to update my tracker for this… It really shook me out of the auto-consumption mode, and it allowed me to make informed, data-driven decisions quickly.
"If you can't measure it, you can't improve it." - Peter Drucker
2. 🔄 you QUICKLY REALIZE WHICH COSTS ARE RECURRING
You quickly identify the monthly, recurring costs. This includes both your necessities, like rent, bills and food. Knowing this number is crucial to understanding your savings, because the recurring costs create the absolute ceiling on how much you will save each month, regardless of how much you cut elsewhere. Evaluate how important each one is (i.e. subscriptions, memberships, etc.), so that you can trim the fat.
3. 🗓️ you CAN PREDICT WHERE you WILL BE
After I started tracking for the first few months, I realized that I could estimate pretty accurately how much money I would save each month. I would already know by the beginning of the month how much I’d add into my savings at month-end, as I could estimate the recurring expenses, and add any bucket of costs that would be unique to that specific month (i.e. birthdays, anniversaries, holidays).
Also, it became exponentially easier to just know if I was over or under-spending, without having to check my tracker. And I would be able to quickly adjust my spending to ensure I came in under or in-line with the budget for that month. This made it so much easier to stay consistent and motivated to stay on track.
4. 🥸 Tracking is USEFUL, not obsessive
I can probably only speak for myself here, since everybody is different, but I think this habit suits my personality really well, since I feel like I have full view of my financial health and control of my finances, every day and every month. Although it may sound like an intense amount of tracking, I quickly realized that it was much less work that I initially expected.
SO NOW WHAT?
I am so happy that I started tracking my expenses last year. I wish I had started years ago. The clarity and control over my finances feels so liberating, as I can project ahead with full understanding of what’s coming in and out of my bank accounts at any given time. I know what I can afford, and I can plan ahead for larger purchases.
I recommend anyone to try this out, even if just for a week or a month. It’s surprising how much it changes the way you spend money.