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When was the last time you tracked your monthly expenses?
Tracking of expenses is not a novel concept. Our elders, especially our mothers and grandmothers always maintained a diary where they would record all the household expenses they’d incur. This helped them analyse their expenditure and plan their budgets. As the world has shifted towards embracing the digital, the concept of maintaining an expense diary has become obsolete or seems like a hassle.
However, this change in tools, from offline to online, does not necessarily mean that we can’t and shouldn’t keep an eye on our expenses. It’s far more important now than ever before to do so. And truth be told, tracking your expenses has become much simpler today with technology simplifying it for us.
While some of you might be particular about keeping a check on your spending, others may find the process unnecessary and futile. But for good reason, this practice is just as relevant today for achieving financial success.
Let’s understand how tracking your expenses could prove crucial:
Brings Awareness to your Financial Health
When you maintain an expense journal you are aware of your average monthly expenses, fixed and variable. You know your disposable income and what you can do with it – How much to spend, what percentage to invest and how not to overshoot your budget. This awareness goes a long way in ensuring your mental peace.
Highlights your spending habits – Good and Bad
We are all guilty of indulging ourselves at some point or the other, and there is nothing wrong with it. Our money is meant to make our lives comfortable and enjoyable. The difference is knowing when you’re going overboard in your spending and checking yourself. Maintaining an account book or a ‘Khata’ will help you identify your impulse buys and keep you from draining your savings.
Forms the foundation of budgeting
There is nothing better than being in control of things and not getting caught up in unexpected situations, unprepared. Having a fair idea of your expenses allows you greater clarity when it comes to building a realistic budget. Not just that, it also ensures you stick to your budget without getting overwhelmed. You will know exactly how much to allocate for your expenses and be able to spend from the surplus, guilt-free.
Keeps you from falling into a debt trap
It is no news that unchecked spending can sometimes lead to unexpected and unfavourable situations; like getting caught up in a debt trap. Keeping a check on your spending allows you to make provisions and prioritize clearing your outstanding dues prior to indulging in unnecessary spending. This way you avoid the risk of slipping further down the debt hole.
Guides your financial goals
While you know that tracking your expenses allows you to enjoy your current life without the worry of your finances getting negatively impacted, it also builds the foundation for your future financial goals. We all have aspirations; we want to travel more, buy a new vehicle, have our own house, or simply pursue a passion. While it may seem like a far fetched ambition when you view this from your current financial situation, there is no reason why it can’t be achieved. With planning, mindful spending you can start working towards your future financial goals. It all starts with awareness!
As simple as it may sound, tracking your expenses and being aware of your financial habits is an insightful exercise that can help you understand yourself better. There are a number of great apps you can use to keep track of your expenses if you don’t fancy the old-school notebooks. This habit of tracking will highlight the importance of prioritizing your spending which in turn will help you establish a healthy outlook towards money.
*Source: The Financial Express
Dated: September 22, 2020