Reduce Debt Increase Wealth

Tracking Expenses

January 15, 2023 MIsterchuck Season 3 Episode 148
Reduce Debt Increase Wealth
Tracking Expenses
Show Notes Transcript

What are the benefits of tracking, and why everyone should be doing this activity. Will go into details of this activity and how to use this information so it not a waste of time.

 Article Links:

https://www.nerdwallet.com/article/finance/tracking-monthly-expenses 

 https://bethebudget.com/reasons-to-track-your-expenses/

Contact: ReduceDebtIncreaseWealth@Gmail.com
Wanting Budget Spreadsheet Place Spreadsheet as Subject
All other inquires place topic into Subject.

Charles McDonald:

Hello, I'm your host, Mr. Chuck, I retired accountant turned truck driver, I reduce my debt in a relatively short period of time, debt reduction to achieve financial freedom takes commitment, confidence, determination. Tracking expenses, what are the benefits of tracking and why everyone should be doing this activity will go into the details of this activity and how to use this information. So it's not a waste of time, I have two links in my show notes for articles I'm referring to. And the one is the be the budget.com reasons to track your expenses. And the other ones, the nerdwallet.com tracking monthly expenses. Just one to a little disclaimer here, the information I'm going to give you how you're going to use this is going to be in a later episode. And it will be greatly beneficial to you if you're doing tracking, because it'd be much easier to do. I've covered all this and paths ever sewed. So it's, it shouldn't be a secret, he should know what I'm talking about. But I'm not going to state it in case or somebody new. So 10 reasons why you should track your expenses. Do you track your expenses on a daily basis? For many people, the idea of logging every transaction into a personal budget sounds like the world's most boring, insignificant task. But truthfully, there are a number of critical benefits. So why should you track your expenses. And short the main reason you should track your expenses to identify and to eliminate wasteful spending habits in your financial life. Moreover, consistently, tracking your expenses will help you maintain control of your finances and promote better financial habits, like saving and investing on the street, there are quite a few benefits to keep track of your spending behavior. So if you're struggling to find a reason to track your expenses, and you're in there, you're in the right place in this article, I'm going to provide you with 10 of them. So let's get started. So what is tracking? Tracking is nothing but keeping a check arresters will be used to call them back in the old days, to where you put in every deposit you make, and you adjust your balance up, and you subtract every check you wrote or every withdrawal you made, then you subtract your balance down. So you had a fairly good idea of how much money you had, and your checking account on a daily basis. So you didn't write checks for more money than what you actually have. Then once a month, the bank would send you a monthly statement, and you'd compare your register to the statement, the bank balance less your outstanding balances, checks should be your check register balance. Same thing with deposits, if you had an outstanding deposit that would be added to your roster, but the bank don't know about it yet. That's called reconciling your account to the bank. That way, you'd be able to identify something that cleared a bank that maybe you didn't do. And that's always a good idea. When you're tracking all your checking account, your savings account and all your credit cards. You're basically looking at what you're spending on a regular basis, whether you do it every day, every couple of days or once a week. And you're looking for things that you did not do. Maybe identify some charge on your credit card that wasn't done by you, because somebody got a hold of your credit card number. I've had that problem. Not really bad. But one time I want in use my debit card at $1. General and then next thing I know I had additional charges on there. I caught it right away. Apparently somebody that worked at Dollar General or somebody got my number and tried to use it and I put a block to it. It's a pain in the butt because now I gotta get new card you gotta cancel that card. So they don't keep trying to use it. But they didn't get any of my money. And I've done that multiple times on my credit cards. In fact, that just didn't last month. I got a new debit card and a new credit card because of that very reason. So you never know they tried to do small amounts first, and then nothing gets blocked and they'll do a big amount and then you'll be broke. What are the other reasons maintaining financial control is number one, one maintaining financial control when it comes to personal finance, being out of control is not something anyone should strive for. There's nothing financially worse than feeling like you don't have any idea of what's going on with your money. The good news is when you make an effort to read, to record every financial transaction you make, you're essentially taking the reins on anything and everything involving your money at any one time, you will know exactly how much money is sitting in your bank account, and how much you should spend or how much you can spend. In other words, when you track your expenses, you take complete control over your finances, to hold yourself accountable. If you have any plans on saving, investing, getting out of debt or building wealth, what is holding you accountable. I mean, we all set financial goals and have financial dreams. But if you aren't tracking your expenses, there is nothing to hold you accountable. When you make a bad financial decision, tracking your expenses holds you accountable to your future financial goals. And in the long run that committed difference between broke and wealthy. So this is good. If you're trying to reduce your debt or get out debt from your credit cards. Or if you're trying to build wealth, you need to do this. You need to track everything for and this goes for everybody, no matter what your situation is. If you make a little bit of money and you got a lot of debt and you're trying to get out of debt or if you make a lot of money and you have little debt and you're trying to invest more, you still gotta track all your sponsors. Three tracking your financial progress. In addition to holding yourself accountable, tracking your expenses on a day to day basis help you see your progress on the road to your financial goals. Sure, there may be times when you need to answer to yourself or a bad financial decision. But keeping track of your positive progress is just as important. Think about it. If you have a goal of saving $25,000 In a year, and you track your expenses every day, you can celebrate all the little wins along the way. For example, if you're forego and expensive dinner out, and instead cook food a home tracking expenses will help you see the impact of that decision in regards to your savings goals. Additionally, tracking your progress helps to keep you motivated on the way to your goals for keeping your finances organized. Throughout my life My dad has a sand is easier to keep playing than to make claim. What he means is that in any area of life is easier to stay organized than it is to organize a messy financial situation. And this sand has guided me throughout my life. And short, disorganized finances lead to financial problems. While we're as if you spend five minutes logging your expenses and looking at your bank account every day, you're much less likely to let anything slip through the cracks. They're talking about expenses because that's 99% of what's going on. He also are tracking your income you need to record your income then there also, so it's not overlooked at five, and proving your financial security. If you go for weeks or worst month without checking your bank account and logging expenses into a budget, you're risking your financial security. What if someone steals your debit card information and start spending your money? That's not a situation you want to find out the hard way. In fact, as I'm writing this, I realized this may be the most important reason for you to track your expenses every day. Consider this would you rather catch a fraudulent transaction and your bank account on the day it happens or discover someone spent all your money at your rent check bounces tracking your expenses every day is a small price to pay when it comes to your financial security. Six reducing your financial stress, ignorance and personal finances is anything but bliss. I mean, we've all seen those people that just don't know seem to care about their spending habits. They throw every single purchase on the different credit card finance brand new cars they can afford to end up buried under a mountain of financial stress. All this can be avoided in two simple steps living on a budget and tracking your expenses daily. The more diligent and disciplined you are about tracking your expenses the less likely you are to make fully financial decisions. And as you reduce your fully financial decisions, you reduce one of the leading causes of stress in your life, money problems. So knowing how much you have, and how much you can spend, is going to reduce your stress. Because you're gonna know that you have the money, you're not going to go to the grocery store and try to buy $400 worth of groceries and find out you don't have enough money to do it, you're not going to be stressing out about that, you're not going to be wondering what's going on, because you're gonna know what's going on son seven, finding ways to save more money. One of the best part about tracking your expenses is that you're likely to find wasteful expenses you can eliminate. For example, on multiple occasions, we have friends tell us that when I started digitally tracking their expenses, they discover they were paying for online subscriptions they're forgotten about. And that's just one example. And in addition to unused subscriptions, you should probably find other areas of financial waste you can eliminate. And when you do so, it opens up the opportunity to redirect that money into savings. And my experience when my wife and I are altar conservative about tracking our expenses daily, we save at least one to $200 more than the month we are a little lazy. Number eight reducing impulse spending. When you make a purchase without thinking about it through or consulting your budget, you can have long lasting negative impact on your financial life. So from what I observe and experience, impulse spending is the enemy of wealth. So I also learned that the closer you pay attention to your personal finances, tracking your expenses, the less likely you are to make impulse purchases. Now I can't be 100% sure why this is but I have a theory. When you track your expenses every day, your financial well being becomes a much bigger focus and priority in your life. So when you see something that you might otherwise spend money on, without a second thought you pause and examine it in the contents of your overall financial picture. And that pause can be the difference between a foolish impulse purchase and the decision to walk away. Nine avoiding debt. I don't think it's any sick secret that here at be the budget. We aren't fans of debt. So to be honest, I never met anybody that loves paying interest, or making money monthly debt payments. Sure they may love the car they find answer the expensive bag they put on the credit card. But you asked him if they love making the payments on it, I can almost guarantee they will say no. For that reason, tracking your expenses can be a powerful motivator to steer clear of debt. When you are in debt and not tracking your day to day expenses. It is easy to let the amount of debt you're paying each month slip through the cracks unnoticed. But once you are still tracking every dollar that leaves your bank account, you will start to add up that payments and that can be eye opening. In fact, one of the original reasons my wife, and I decided to get out of debt and stay out of debt forever was because we started tracking our expenses. were disgusted by how much money we're spending on debt each month. It was overwhelming to say the least. But thank goodness we did 10 Stay focus. Every time you sign into your bank account and start logging your expenses can only take a couple of minutes, there are making a conscious choice to focus on the wellbeing on your financial situation. And this small consistent action can lead to powerful results. Think about it. If you're a focus your energy every day for the next year on saving more money. How much do you think he could say, if we're to focus on getting now debt, how fast you think you can pay it all off. Tracking expenses may seem like insignificant tasks, but it's a daily trigger for you to refocus your goals and keep getting better. I agree with all those pretty good reasons. If you're doing on a daily basis, one you're going to know how much money you have. And your checking account and your savings account. Two, you're going to know how much money you owe on all your credit cards. If you know that your credit card balance is starting to get too high, you're less likely to put another charge on it. Because if your focus is trying to reduce your debt, you're gonna be less willing to maybe charge something on that credit cards because you know that that balance is starting to get a little bit out of control and you want to keep the balance at a minimum Money or this say, zero. If you're like me, I don't like paying interest on any loans no matter what it is, I don't like paying taxes. No matter what kind of taxes it is, I think it's a waste of money. And I've done it my whole life, you can avoid it. But you can definitely minimize those two things. If you know what you're doing, and the Skipton started, whether you're trying to reduce your debt, or if you're trying to increase your wealth, or if you're trying to save more money for whatever the reason, you need to track everything, you need to track everything going through your checking account, your savings account, and all your credit cards. You can do it manually on a piece of paper and use a pen and paper or pencil and paper. Or you can use an app. If you use an app, that's the way to go. There are many apps out there that you can use, find one that you're comfortable with, and understand how it works, and use it on a regular basis. And before you know it, you'll have it under control. The app I use is like less than $10 per year, I do not connect it to any of my accounts. The reason is, I want to manually enter everything. So I'm more aware of my spending. That's the idea of tracking. If you automate it too much, it's gonna come in, you're gonna take a quick glance at it and may be in the wrong category. do manual have useless information. That's why in an is going to cost you more. If you're trying to get out of debt or save more money, you don't want to be paying out any more expenses, then you have to. So that's one way you can reduce that expense, I use an online app, it's called count about.com. All one word count about.com. It's easy to use, it's already got category set up in it. And it's inexpensive, you get I think 30 or 60 day free trial long enough for you to learn how to use it. And it's an insignificant amount of money to pay for it. And that's what I use. And I just got done updating it took me Oh, no less than five minutes. I tried to do it at least once a week when I get paid, I'll get paid on a weekly basis. So I put in my deposit. And I put in everything that I spent that week. Now one of the things I do to minimize the amount of entries I have to put in is I have a second checking account that I transfer the amount of money that I'm going to use for that week, and two, and then I don't track it at all. Because I tracked in Mint, the minimum amount that I transferred in there, from my main checking account where it really counts. And then I use my second checking account as a debit card to buy incidental things when I'm out and about. I'm a truck driver. So I'm on the road, when I go and get something to eat, I will use it when I buy something, I need all use it. And then I don't have to get a receipt, I don't have to track it because I already did. And once I spend all the money, I can go online and look at the app and see how much money I have. And then once it gets a little low, I quit using it because I know I'm at the end or close to the end of the week. And it's gonna get reloaded on Friday. And I just want just quit spending. And that's how control my spending on the subject matter. And I don't have to enter I enter one entry in my main checking account for the total amount I transfer over. You can do the same thing. Set up a second checking account. And if you know how much money you're gonna spend on groceries from paper to paper, how much money you're gonna spend on gasoline from paper to pay for your car, figure it out and transfer that money into the second checking account. And then use that one to buy your groceries in your gas for the pet for that particular pay period. Now you can go online and look I even do it at a different bank. He can do it at the same bank. Go online and see when you're to zero because the price of gas goes up and down so much the price of groceries are gone. lined up, so you might have to increase it a little bit. But then that is a start for you to keep your spending under control, at least those two categories, and you only have one or two or three entries to make every pay period. So you keep in your tracking under control in don't have 20 or 30 entries you have to make, you just make the three. Sounds easy because it is. And it's a simple idea, you can get a second checking account out shouldn't charge you anything for it. So if you can get one for free, I highly recommend doing that. Okay, tracking monthly and first step to money success. So if you want to help reduce your debt, or increase your wealth, then you need to track your statements. And one part of the tracking is categories, your expenses. That's why you're using an app, because they already had a category set up, you can use their categories in you're already started. And then you got to be consistent. If you go to the grocery store and buy groceries, and it'll automatically put it in there for you once you set it up the first time once you make the first entry. Be careful. If you go to that same grocery store and you buy gasoline, make sure it gets categorized as fuel or gasoline for your car, and not groceries. Because you want to be consistent on knowing where your money goes. So you can have a good idea on setting up your budget. And then this second article, which is the nerdwallet.com they're breaking out needs and wants. If you are overspending you do away with your wants or cut back on your wants. And then you can if you're still overspending and if and you're just spending on needs, then you need to renew green seeds, you can get cheaper rates on some of your needs. I'll be back in one moment with my final thoughts. If you're interested and learning about an online software that helped myself get out of debt, it does tracking, budgeting, and keeps track of all your assets and all your debt. And even tells you how much and when to transfer money into your savings account. And how much and when to transfer money to debt and which debts to pay off and order. First. It's not cheap. It's a one time payment. But it will definitely be an investment, something and yourself and an investment in your personal financial life. If you're interested, send me an email at reduce debt increase wealth@gmail.com. And I'll send you the information about this online software that worked great for me. Some of you may think tracking is a waste of time and not worth it. But don't believe me, it is not a waste of time. We already went over the reasons why you should do it, and helps keep you under control as far as your spending. And if you have a spending problem. That's why you may have a debt problem. So if you're trying to reduce your debt, you probably have some type of spending problem unless something else happened, which you will know what that would be. And then you're trying to recover from whatever event happened in your life is still need to track everything. You need to track all your income, you need to track all your expenses, that's through your checking account through your savings account, through your credit cards, every credit card, not just one, all your credit cards. And this is important, because this is gonna help you set up and get ready for the next step. I'm gonna do, this is the first of a series of three. My next episode is going to be reducing debt. And then the third episode is going to be setting up a button. If you don't track not going to know how to reduce your debt. You're not going to know if you're making any progress on reducing debt, you're going to be much more difficult to set up a good budget. A budget is no good. If you just make up numbers and plug numbers in you don't even come close to even being on track with your budget. because you'll look at it, and say it's a waste of time, and you won't do it. And that's gonna be your financial failure. So tracking is the first step. And they get yourself under control, organized, and ready for success to meet any financial goals you may have, whether it's reducing debt, increase in your emergency fund, increase in your savings, whether it's for a vacation, or a new car, or whatever the case, you will have a good idea if you can afford it or not. I never go out and buy a new car. And when I say new a new car to me, because I generally don't buy a brand new car, I buy a used car, because it's a much better deal. Because buying a car goes down in value over time. So if you borrow a bunch of money, not only is it going down in value, but your mortgage, your loans, not going down only what you make payments on, and you're paying interest on it. So it's the double whammy. You're not gonna build wealth by buying brand new cars. Is this a bad investment? So you buy a used car, and you keep your spending under control even on that? It's important, because staying out of debt will free up much more money. If you have a lot of debt, just add up all your payments you make on debt and think, What could I do with their money if they if I had no debt? You could do a lot more than what you're doing now. So with all that in consideration, listen to my next couple episodes, and we'll get you on the right track to building wealth or decrease in debt and decrease in debt is going to build your wealth. We'll get you on the right track and headed into the right direction.