Reduce Debt Increase Wealth

Benefits of Tracking Expenses

July 17, 2022 MIsterchuck Season 3 Episode 122
Reduce Debt Increase Wealth
Benefits of Tracking Expenses
Show Notes Transcript

What is tracking expenses and how will this help in getting a budget under control. This is the easiest way to setup a budget and to maintain a budget without using a lot of your time. 

 Article Links: By Jerry Graham 


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Hello, I'm your host, Mr. Chuck, I retired accountant turn truck driver, I reduce my debt in a relatively short period of time, debt reduction to achieve financial freedom takes commitment, confidence, determination. Benefits of tracking expenses? What is tracking expenses? And how will it help in getting a budget under control? This is the easiest way to set up a budget and to maintain a budget without using a lot of your time. First of all, I got two articles in my show notes if you'd like to link to him, and check them out. But we're gonna get to those a little bit later. What is tracking expenses? is simply put tracking expenses? Is this the matter of you? Keeping your own to record of everything that goes through your checking account, your savings account, and all your credit cards separate from what the bank is doing? And why do you want to do that? I keep saying back in the olden days, pre online banks, you had a checking account. And maybe you had a credit card, but a credit card, you got a statement once a month, so really didn't know if you didn't use it too often was no big deal. And maybe it was a surprise when you got your monthly statement that you went over, that you spent more money than your available credit. Well, that should never ever happen, that perhaps it did. On your checking account we kept a check registered was simply a written items of everything that went into your checking account, and came out of your checking account. And you record every check, you wrote the date, check number, who it's to the dollar amount. Generally speaking, if you wrote it to a grocery store, you knew that was for groceries. Or if you wrote it to a gas station, you knew that was for gas for your car. So you pretty much knew by the name of who you were writing a check to have what generally what it was for. But sometimes you would put notes in there like you would appliance company store, and you would put purchase new TV or new TV, or just TV, so that he reminds you that you buy yourself a new TV. So every time you would deposit money, you would add that to your balance. And every time you wrote a cheque, you would subtract that from your balance. And then once a month, you would reconcile your written register to the bank statement that you got in the mail. Well, since we have online banking, that's kind of one away. But you should still be doing something to that effect. And the reason is, if you write a check, and you hold it, say it's like December 20, and you're writing a couple checks, to make donations to charity, and you want that to be on your tax return for the current year. But you don't really have enough money in your checking account at that point. So you write a check you dated December 20. Maybe you hold a check to December 29. And you mail it because then you're gonna be paid the next day, and you'll have enough money to cover the check. And then that is in the mail for a couple days. And then maybe they receive it or maybe when the charity that you mailed it to was on vacation because of the holidays. It might be four or five or six days later, before they open it up and process it to make a deposit in their bank. And then they take it to their bank and might be a couple days more before the bank clears and it shows up in your checking account. So it could be a one or two week delay before it actually money is actually taken out of your checking account. But in your register, you record that when you write the check, not when the check clears so that at the end of the month, that would be considered a Outstanding check. And the same thing with deposits. If you made a cash or if you made a deposit of a check, it may be two or three days before it shows up as a deposit in your checking account. That would be an outstanding deposit. So when you get your bank statement, and at the end of the month, now we're doing this online, at the end of the month, let's say that you're pretty good. You go online, you know what your balance is, you put that in your software that you're using, and you clear everything and then you unclear This is how I do it, then you're unclear the items that have not showed up and your checking account yet. And then the reconcile balance should become to zero. I do all this using a program that I pay $9.99 I think it's about 10 bucks a year, it might be $9.95, somewhere around there. But that's a yearly charge, once a year, I pay that and it I go online, I log in, I didn't have to download any software, I don't have to do any of that. I go in, and I enter all the transactions that went through my checking account my savings account, and or my credit cards that I'm currently using. And then once a month, I reconcile it by put in the bank balance, and then I do it the easy way I click the box, it says clear all and then I go through and if it doesn't come to zero, then I figure out which ones are outstanding. And I unclick those and it comes to zero and I'm done. It takes me about one or two minutes, it could because I keep it updated every week. Every payday I pay once a week, I update my check register. And it's quick and easy. I spend maybe two or three minutes a week and then I spend maybe another two or three minutes at the end of the month, clearing everything out. And by the importance of this is you know what how much money you have in your checking account, you know how much money is available for you to use, and or transfer to your savings account. I'm gonna go to an article that's called the importance of keeping track of your expenses. There is a popular saying that the easiest way to becoming bankrupt is by not paying attention to your expenses. There is nothing that captures the importance of keeping track of your expenses. Better than saying that. So if you want to go broke, continue on the path of not knowing how much money you have in your checking account. The responsibility of taking care of our own finances doesn't happen when you start earning from your job. It starts much earlier for some when they get to college and for others even earlier. If you don't learn how to manage your finances earlier in life, you may find it more difficult to adopt proper monetary habits later, when you begin to earn from your employment or business. In life if you're continually in debt, it means you do not pay enough attention to how you spend your money. It's important to monitor spending as to avoid falling into a nasty financial situation. People purchase many things over the course of a month. It may just be a pack of gum, a newspaper and ice cream, or even clothing and household items. At the end of the month. When you evaluate your purchases, you may discovered you made more than 50 purchases just in one month. At that rate. If you do not track your expenses is easy to go overboard beyond your income. Why track your spending. Being aware of our spending habits is the best way of utilizing our money. When you know how much money you spend is easy to balance your income with your spending and even save for the future. If you operate a budget daily, monthly or even annual, the best way of ensuring that your spending is within the budget is by tracking your spending. When you track your spending you know where your money goes, he can ensure that your money is used wisely. Tracking your expenditures also allows you to understand why you're in debt and how you got there. this will this will then help you design it befitting strategy of getting out of debt, ways of keeping track of your expenses. There are several ways of keeping track of your expenditures. And even those ways may not be identical, as people tend to adopt systems and personalize them to suit their interests and needs. Some of these include the paper trail, this is one of the best methods. This is one of the most basic methods. tracking your spending by paper requires diligent and writing down every transaction immediately after the transaction is done. The advantage of this method is that it ensures you to make comparisons with your credit card statement to ensure that your purchases matches the credit card records. It's also easy to track how much you spend in a month by simply tolling the amount you have in your paper trail. The only problem with this method it's demanding II may be unable to diligently record a purchase you make. Now I have a easy way of doing this paper trail. You don't have to record it in your online register right away, I'd be nice if you could keep the receipt. And on the receipt if you if you want to make it easy, put checking credit card, put where you use or what you use to pay for the item. That way, when you get home, and you log in online, you pull out your receipts and you enter men. That's the easy way. If you don't want to keep receipts then you go online, you log into your checking account online, you enter it in your register that new purchases, you log into your credit card statement online and you enter in your new transactions. If you do it every day, it only takes a minute or two. If you do it once a week, it takes a little bit longer. If you do it once a month you're dread doing it, you'll put it off and it won't get done. Because it'd be way too time consuming. Using credit card statements. Using your credit or debit card statement allows you to employ the advantage of technology and saves you the stressful diligence of writing down every purchase. At the end of the month, you use your credit card or debit card statements to track your expenditures. But this method isn't complete. Because it doesn't capture the cash purchases, you may periodically make online services, there are various online services that enable you to track your expenses online. These methods are becoming popular because they maximize the use of technology. Instead of using paper trail than domains you to write down every transaction or use the credit or debit card approach that would require you to total up your expense at the end of the month. All you need is a software to do the work for you. In short, when you track their expenses, you experience freedom and spending while avoiding the fear of debt. tracking of expenses ensures that your financial life is manageable. And within means I use count about all one word count co, it's $10 a month, I do not link it to my bank account. Because that's the fading the purpose the one of the major purposes of you entering this and putting in manually is so they can remember and know where your money is gone and how much money you have spent. If you automate it too much, you're gonna make it kind of easy. And then again, if you write a check is not going to be on the bank statement, it's not going to get in your restaurant too. After it clears, then it may be too late. Because if you write a check for $1,000, and it's outstanding, you might forgotten about it. And then you spend that $1,000 Again, or at least part of it. Then when that check clears, you're gonna be overdrawn. So manually enter your transactions. And if you just keep the receipts as you do your spending, and every day, enter it. It's quick and easy to do. Now you may miss a thing here or there. I understand. But if you get the majority of men there is going to be the best way to do it. And that's what I do. I became debt free In three years and eight months, because one, I tracked everything, and two, I had a budget, and I was tracking stuff, so I could stay on my budget. Now, I didn't cut out anything. I didn't go without I didn't. Do you know, I mean, it's not like I suffered darkness. I just managed my money. And I managed my spending. And I knew that, you know, at certain times in a month, I had a mortgage payment, do I had credit card payments do I had utilities do and I had no money available to pay for those items? How? Because I kept track of things. The 11 important benefits of tracking your expenses is my next article. Why is it important to keep track your expense, it's important to keep track of your expenses so you know where your money goes, you can then start ensuring that you spending your money wisely. When you track your spending, you can cut out bad spending habits, create and stick to a budget and make sure you're putting money towards your goals. This, look at the reasons why you should track your expenses, there's 11 ways here and let's get started. One puts you back in control. It's a terrible feeling, not knowing where your money goes, you wonder how you made he came to be that your work hard. And yet you don't have enough cash to afford a cheeseburger until the next pay day. You feel lost and out of control. When it comes to your personal finances. I've been there and I don't even want to go back to that place. You have to take control, no one is going to stop you from spending all your money, friends, family and business directly and indirectly encourage it, you're in charge of your financial decisions. Don't only one who can make sure you don't wind up broke, unable to retire. And wondering how it all happened is you taking back control starts with tracking your expenses. I remember back when I was much younger, on Friday, I used to go out and have a few drinks with some friends. And I know people that one out to a bar took their paycheck to catch it at the bar, and pretty much spend most of all of that at that bar on that one day. Maybe they used part of it to pay the bar tab throughout the week. And then they bought everybody drinks. And then when they left on Saturday morning, they were broke. And of course that doesn't help if you're married, you got bills do bills and getting paid. It just puts a lot of stress in your life. You want you don't want to be that guy, you want to be the person who knows how much you got, I want I want out, I took a set amount of cash with me. And when I ran out of cash, I was done. I went home when two that kept me somewhat sober. And I was able to drive home without getting pulled over for a DUI. And let's get back to budgets, spending tracking your spending to identify budget categories to reevaluate. And then if you use count about it comes with categories already set up. And you just be consistent on how you apply your spending to category. So every time you buy gas, no matter which gas station is make sure it's auto fuel. If you go to the grocery store doesn't matter which grocery store it is make sure it's groceries, little things like that. So when you're consistently applying to a category, you're getting consistent information through your reports. What percent of your net income is spent on housing, food and transportation? How much money do you save for a rainy day every month? How about your discretionary spending? The answers to these questions can be easily found by tracking your expenses. Once you know how much you spend and for what you can see where you can cut or eliminate some spending, they can usually find a few things to stop buying to save money. After seeing the numbers you might decide reducing your housing costs. Driving a more affordable car or assigning a food budget we're making immediate and lasting impact. Three shows your bad spending habits. When you start tracking your expenses, certain patterns, habits and spending triggers emerge. You might be unaware of a merge. You might unearth unused discredit on new subscriptions, or a small everyday expenses you can easily eliminate like daily latte. For example, it wasn't until I start tracking my expenses I realized As I was spending over $40 a week in gas stations and convenience stores, buying drinks, snacks, gum and other unnecessary stuff, I was embarrassed enough to cut it out completely. It's not a ton of cash. But it looks better going into my emergency fund rather than going towards beef jerky and gummy bears. tracking your spending helps you get rid of bad money habits and makes more financially sound decisions. Which is an example I have a stepson who his mother pretty much supports him. He wastes so much money, he buys things, and then he goes somewheres and leaves those what he bought behind. So he then when he gets somewhere else, they like traveling, he's got to buy the same thing. Again, he's just wasting more money, he's repeatedly buying the same item over and over, and he leaves it behind, he doesn't take care of his stuff, he doesn't keep track of his personal stuff. So he's got to keep spending more money to buy it again. And again, again, that's just me. I'm ranting, nevermind. Number four, it keeps you from overspending on what you think you spend on certain things and what he actually spending could be miles apart. You never know, if you're not tracking spending. For example, my family was spending hundreds more on food. And we thought we were it was shocking to see but the numbers aren't lying, we immediately start figuring out ways to reduce our grocery spending and committed to doing so. And that's when I first started when I was in my 20s or early 30s. I had a program that was my check roaster and did a budget when I did a budget. And I went in there and asked you for different numbers and night, I just made up numbers. I mean, I would go back, you know, maybe a week and add it up and then extend it out thinking I was close. And then once I got to the end of the month, I would compare it in my budget. And my answer was like two different things. And I've just give up, I wouldn't even do it as though it's a waste of time, I'm just wasting my time trying to do that. Because there's no way I'm gonna stay within my budget, because look at that. I'm not even close, I got a good program. And once I got the program and start thinking about this a different way. It's not that I had to stay within a budget. But I set up a budget that stays with my spending. So if my housing costs are X amount, my budget is the same amount. If my entertainment was X amount, my budget was the same amount. I wasn't trying to use my budget to control my spending. And once I figured that out, then I could see where the money was really gone. And I could look at different categories and look at the details. So I'm not using that no more why am I still paying for it? I'm not using this anymore. Why am I stuck? He started eliminate things like that. And you just use that slowly get you under control. And you do it and you don't even realize it. And then I look at why am I paying $130 a month for cable TV. I'm hardly ever home. Only watch it 10% of the time, how can I get the same things cheaper. And so I started streaming. So I got rid of my cable TV. Now I only stream the items that I actually watch. And I've saved tons of money doing that. And five tracking helps you avoid debt. If you have student loans a car payment and carry credit card debt, seeing how much you pay to creditors every month is illuminating. You can drill down farther by examining your credit card statements and determining how much of your money monthly debt payments goes towards interest and other fees. You'll be inspired to focus on getting out of debt as quickly as possible. You'll also be discouraged from taking on any new debt at once you see you got to make timely payments on your debt. Even if it's only the minimum amount. So your first step is if you're paying fees on credit cards because of late payments under payments or whatever, that's got to stop. He has to make the minimum payment every month on time and stop those fees is bad enough. You're paying 1617 20% interest. Why do you want to pay more than that? Six helps you cut out impulse spending keeping track of spending caused you to think before you spent if you know how much you spent and on what you're less inclined to purchase something on a whim. When I'm reviewing my receipts and logging my expenses. I know I don't want to see hundreds of dollars going out the door for mindless spending on impulse purchases every month, seven keeps you focus on your goals. You have to track your spending if you plan on reaching any financial goals, my main excuse for not getting started with investing a lot spending was I didn't have enough money, the truth was a little different. I didn't need to get a raise or earn extra money before I could start focusing on the future. I had enough money, but I wasn't just managing it well. tracking your spending will help you ensure your spending your on your priorities and putting money towards your financial goals, which could include getting out of debt, building your emergency fund, starting an aggressive savings plan or investing in the future. Eight reduce stress, not knowing where your money all goes cause stress not being 100% sure you have enough money in the bank to cover your bills is stressful. And stress is known to cause all sorts of serious health problems. So it stands to reason that if money is a major stressor for you, managing your money more effectively could lower your stress level, or get rid of your money, anxieties all together and improve your health. Tracking your monthly expenses is one of the foundations of better money management improves your relationships. Early on in our marriage, my wife and I didn't track our spending, think about a budget or have any idea what our financial future look like. We didn't have a huge income, discretion see between so we split expenses down the middle. We reckon that since we both work and neither of us had an exuberant taste, we didn't need a monthly plan and money would just sort out work itself out. That approach proved to be a huge mistake when life threw us a few curveballs. Once we start tracking expenses, we were able to get on the same page about our finances and see the big picture. We talked everything out and started making our spending decisions together. We said short term and long term goals. We started budgeting and embrace frugal living, we reached new levels of communication and teamwork that coupled the budgets together stays together. And all starts with expense tracking. Yes, money problems is probably the number one cause of divorce and or problems within any relationship. So if you work together and track your money together, you both know exactly how much you have and how much you're earning and how much you're spending. You both know what's available, what's not available, and what bills are going to be due in the future. 10 ensures you catch fraudulent transactions in time. I logged in my bank account one morning and saw a large pending transaction from Best Buy I didn't recognize I caught it before my bank's fraud department did I didn't know if they ever would have ever since I'm no stranger to electronic stores. And I purchased from Best Buy website before. I didn't check my expenses every day I might not have found out about until it was too late. Yeah, same thing with me. I've checked some of my expenses on my credit card and found some charges overseas somewhere and caught it. Some I got my credit card information and was trying to spend money on it. We blocked it and of course then they cancelled that card and give you a new card. It's the same account you just get a different number on your card. Imagine your debit card gets declined at the grocery store area check your rent check bounces now you're on the hook for late payments, fees and return check fees. Your bank account is wiped out until you go through the process of getting restored and having a new cards issue. Finding out your your account was compromised when it's too late and you're bouncing payments all over town is the worst way to find out and track your expenses if for no other reason to protect yourself from fraudulent charges. If you hadn't logged into your bank and Monster take a daily habit starting today. He lovin gives you a sense of accomplishment. If you've been struggling financially wrapping your head around when your money goes and coming up with a plan to spend your money wisely is a huge win. It's an achievement that you have you're feeling more confident about the future and have you sleeping better at night. start realizing the benefits of tracking expense and start Tracking today. When I come back, I'm going to talk about how you're tracking using an online account. The tracking, you know, keeping an online register of your checking, savings and credit cards can help you create your budget much more easier. So I'll be back in one moment. If you want to contact me to request my spreadsheet for the budget, or leave a comment or ask a question, you can send it using my email, reduce debt, increase reduce debt, increase wealth is all together no spaces. If you like to ask a question, quick question in the subject. If you'd like to request my monthly budget, put budget spreadsheet in the subject matter if you want to leave a response of any kind is put a comment in the subject manner. I will get back to you as soon as possible. How does tracking help you with your budget, that's what I'm going to talk about next. My final thoughts, you can do tracking manually and manually write everything down on paper. But that's very time consuming. I recommend you get a online program to do it like I do. And by the way, I'm not getting paid to promote count about that calm. But it's a very good and inexpensive program to do this function. If you have software already that does the same thing. You need to be using that. If you may be you don't have software and don't want to pay the $10 a year, which is fairly cheap, I think there's a trial period in there, you can use it to kind of learn it a little bit. You can also do it on a spreadsheet. So if you got any type of spreadsheet, you know how to use a spreadsheet, you can set up your description across the top date, check number description, that's who it's to the dollar amount, category, and then run down a whole month, you start out with a reconciled balance on your online account. So you go online, he looked at your balance, is there anything outstanding? If so you account for the outstanding you start with the opening balance, then you subtract and add from that balance all the deposits, you make the add to it and then all the checks you write or all the payments you make you subtract from it, when you get to the end of the month, you got an ending balance, then you want to reconcile that out with your online bank account to make sure it matches. If it doesn't match, you got to figure out Did you forget to enter something, or maybe you have something that's outstanding, and you do that. So once you get done with the month, he did highlight, not the description area, but all the detail that you put in, highlight it, and sort it first by category and then by date. So that'll lump all the same categories together, then you can go out to the right and another column and do a sum by category. So you can sum up the first category that's on there would be an alphabetical order, you can sum that up go through and now you have your total amount spend by category, which now you can use that to put in your budget. So if you've never done this before, you're just getting started. Let's say it's July, maybe the first or second week in July, you go back to June and start and you enter everything in you do the same thing. If it's an online software, you can do exactly the same thing. The online software will have the categories for you. So you don't have to come up with categories. But I'm sure you know, it's not that difficult. And then at the end, you get 30 days in there. When you get all that done, then you want to get it reconciled. Then once that's done, you update it to the current date. Now you go back and you do report for the previous month and you want to do a category report. You want the totals by category for the month of June. And those are the numbers you're gonna use to start your first budget. When you use your budget dollar amounts for you're gonna do a budget for July no matter what how For ending July we are. And you're going to use your June spending for your dollar budget dollar amount, because your budget is three columns, a budget, actual difference, I do have a spreadsheet set up to do this to kind of help you, if you're interested, you can send me an email to reduce debt increase And I will send you my spreadsheet, which you then can use in any spreadsheet, it's an Excel, I do have a video out there, Facebook, that goes over how to use it. So I'm not going to talk about that. So now we have a budgeted amount. And now we go to the current month, and it's up to date to whatever you're where you are. So you would start at the beginning of the month, through the current date, and you do another report by category, not your actual, you put that dollar amount in your actual. So now you can see how you're doing and the current month as compared to the previous month. You do that for a month or two to see how your spending is going. If you are thinking a certain category, you're spending too much, he can look at the detail, maybe you'll discover some items that you no longer need or use and you can cancel those subscriptions. Or maybe you can cut back on buying that particular item that you think you're spending too much on. Again, you need to think that we're in an inflationary period. So like your gasoline spending should be going up every month, not a whole lot, but should be going up a little every month. So you would need to adjust that also, your groceries may be going up. Or maybe you're spending way too much on groceries or way too much on Dining Out. And you can cut back on the dining out and spend more on groceries, that would be okay. But the idea here is to track and monitor where your money is gone. So now you can make an informed decision on what to do about it. If you do not have an emergency fund set up, it's just a savings account, you put some money in there and you never use it. And unless it's an emergency, you need at least a minimum of $1,000 To get started, then over time, you're gonna slowly increase it. That's the benefit of having a tracking online software, because now you can get good reports out of it. And you can use it for your budgeting purposes. Now your budget is becomes fairly easy. And it's simple to do. And it's not going to take you a whole lot of time. So it's well worth the effort to get started today. And start tracking everything that goes through your checking savings and credit card accounts. So that you can look for fraudulent items, you can look for overspending, you can maybe plan ahead, you know, maybe have a big expense coming up, you can not spend some money that you normally do cut back somewhere, and you'll have the money available to pay that big expense you have coming up. One more thing is once you get it up to date, you do that every week. You create a report once a week so you can update your actual amount on your budget. So you start in the current month from the beginning of the month. Through the current day that you are in you update your budget to the actual dollar amount. Every week. When you get all your tracking information in there. create yourself a report. Plugged in numbers. You can see how you're doing