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The only way you will ever permanently take control
of your financial life is to dig deep and fix the root

Suze Orman

The benefits of tracking your spending

I wrote a previous article here that discussed the benefits of organizing your personal
finances.  If you have not read this article I urge you to do so.  If you do not have
personal finance software, you will need to choose personal finance software that will enable you to keep your finances organized but also allow you to track your spending. Organizing your personal finances and tracking your spending will allow you to gain control of your financial life and become more conscious of money and allow you to make better financial decisions for the rest of your life.

Choose personal finance software that meets your needs.

There are many personal finance software and sites to choose one.
There are Microsoft Money, Quicken, Mint, Personal Capital, AceMoney,
Moneydance and YNAB. I use Quicken and have used it for years.
I use Turbotax for my taxes and Quicken and Turbotax are owned by the same
company, Intuit. They work well together and it makes things easier when I go
to work on my taxes. You need to find software that meets your needs. You can
do google searches for personal finance software. Find personal finance software
that you are comfortable with, meets your needs and is easy to use.

Track all of your spending for at least 3 months.

It might not sound sexy but I urge you to track all of your spending for at least 3
months. It will open up your eyes to what you are really spending money on. You
need to track all of your spending.  You need to categorize your spending in
categories that make sense to you and your lifestyle.  The key is to track your
spending each month and make sure to include all of your spending. You might
not want to use cash as much since this involves making out a receipt and
identifying what you spent your cash on. If you used a credit card, you would
already have a receipt that you would need to enter in your personal finance
software.  You can keep a manila folder for all of one month’s expenses. Keeping
your receipts will also make it easier to return something to a store if you need to.
If you like the manila folder idea for receipts you should keep only two of them,
one for the current month and one for the previous month.

your money

Some items need special care.

If you pay a mortgage, some of your payment should be for principal, which is a
reduction in your mortgage balance, and this is a form of savings.  Some expenses
will need to be spread over more than a month such as payments for auto insurance,
life insurance or disability insurance to name a few. If you have expenses like these
you can create a prepaid auto insurance account for example when you shell out
your payment for 3 months, 6 months or 12 months of insurance and then expense
this cost on a monthly basis over the appropriate number of months.

Income – expenses = savings. Reducing your mortgage
balance = savings.

All of your income less all of your expenses is savings. Savings is also any reduction
in the principal balance on your mortgage.  Said another way contributing extra
amounts  towards the principal on your mortgage reduces your loan balance,
which increases your net worth.

You need to track all of your income too.

Track  all of your salary, wages, dividends, interest and any other income you have.
Since you are set up with your personal finance software, this is easy to do.
Your software will allow you to track all of your income and expenses. You will
need to log on to your software and update it at least once a week to make sure
you are capturing all of your income and expenses. If you are comfortable with
Excel at the end of each month you can make an Excel worksheet with income
at the top with all of your income line items underneath, expenses with your
various spending accounts and then a separate area showing the reduction
in your mortgage balance. You will need to subtotal your income, your
expenses and the reduction in your mortgage balance and then run a total.
To make an equation you would get the following:

Income – Expenses + Reduction in Mortgage Balance = Savings.
Tracking your spending may cause you to spend money differently.

When you start tracking all of your spending you might begin to spend money
differently since you have to be accountable to yourself with your spending.
After all if you can’t be honest with yourself, who can you be honest with?
Since you are tracking all of your spending and actually seeing where you are
spending, this will allow you opportunities to hone in on certain expenses to
cut them or eliminate them all together. Since you need to be accountable to
yourself for your spending, you may also begin to become more conscious
with how you spend your money. You might find yourself asking do I really
need this item? Is this item a need or a want? How can I cut our monthly
expenses? What I can I cut next?

Less stuff = more savings.  More savings = more time.

You should align your spending to what matters to you and your family.
You do not need to impress anyone so forget trying. Conscious spending will
allow you to spend less on stuff.  And less stuff leads to less clutter which makes it
easier to clean.  Less stuff = more savings.  More savings = more time.  More savings
= more time if you are able to invest your savings to earn a return on your money
that grows over time.  Earn enough money from something other than work and
if you can do it consistently, then you have become financially independent.
When you are financially independent, you can do whatever you want with your

Tracking your spending may change your life for the better.

Tracking your spending and I mean tracking all of your spending may cause
you to spend money more consciously, more conservatively, and may cause you to
become more frugal with money for the rest of your life.  You certainly will become
more aware of where your money is going.  Stores would love it if you were less
conscious of how you spend your money if you weren’t tracking your spending.
But you are better than that. You can track all of your spending and your income too.
And armed with the information you have on your income, expenses, and reduction in
mortgage balance you can gain control of your financial life and reduce your spending
to align your spending with your own personal goals. Some personal goals might be to retire early, to get out of debt, to save up some money and move to another part of the country, and to travel. You work hard for your money, you owe it to yourself to track your spending to allow yourself to spend money wisely.  Are you spending your money in alignment with your personal goals?

Savings represent much more than mere money value.
They are the proof that the saver is worth something in
himself.  Any fool can waste; any fool can muddle; but it
takes something more of a man to save and the more he
saves the more of a man he makes of himself. Waste and
extravagance unsettle a man’s mind for every crisis; thrift,
which means some form of self-restraint, steadies it.

Rudyard Kipling

Spending money wisely makes good sense. And good cents.

Tracking your spending is one of the best financial decisions you will ever
make because it opens your eyes and allows you to have a different relationship
with money. Money is there to work for you. It is the fruit of your labor, use it
wisely.  Don’t piss it away. Respect money. Become frugal and you might be able to
stop working sooner. You can then have more time to do the things that matter
to you such as spending more time with family and friends.


Organizing your personal finances is a critical first step in gaining control of
your financial life.
Here is my article on the benefits of organizing your personal finances.
Here is my article on the benefits of cutting your spending versus earning more money.
Track your spending for at least 3 months to see what you are really
spending your money on.
Once you track your spending for at least 3 months I don’t see how you could
go back to not tracking it.  Tracking your spending may lead to you spend your
money consciously since you are tracking of all of your spending. And you need
to be accountable to yourself.
I hope that this article inspires you to track your spending and allows you the
opportunity to gain control of your financial life and spend money more wisely.
Spending your money consciously, wisely and frugally will lead to a better
financial life and will allow you in time to spend more time doing the things
that really matter to you.