The median saving rate of Americans hovers at about 0 per month, and things aren’t any different in UK or any of the first world countries While this stat might appear shocking, it nevertheless paints an accurate picture of the spending habits of most of the individuals. And for most part, the reason not being able to save is simple – not keeping track of the expenses.
No one would want to go on a road trip without knowing where they are headed or what the destination is. Sadly, that is how most people handle their finances. We spend money in the account without giving any or much thought to where the money is going from the account.
Keeping track of the spending is a key component of effective money management. Without keeping tabs on your expenses, you won’t be able to make efficient use of your limited financial resources. There are several reasons that you must keep track of your expenses.
Makes You Disciplined and Smart Spender
The act of tracking your spending makes you aware about how efficiently you are utilizing your money. It forces you to ‘think’ before spending money. In this way you become a more discipline spender and avoid wasting money on unneeded expenses. The more time you spent tracking your spending, the more ways you can think of saving more and earn more money.
2. Helps in Prioritizing Expenses
Another benefit of tracking your expenses is that it helps you to prioritize your expenses. By using budgeting tools and apps, you can get an overview of all your yearly expenses, and forces you to prioritize expenses according to their importance.
3. Assists You in Meeting Your Goals
The third important benefit of tracking your spending is that it helps you to meet your financial goals. You cannot reach your goals of saving for a dream vacation, owning a car, or building a sufficient nest egg for retirement without knowing your spending habits.
4. Prevents Financial Hardships
By keeping a clear view of your spending, you can avoid falling into a debt trap and remain financially in the green. Looking at your spending habits will make you disciplined and considerate as to how you spend your money. This will force you to spend within your means and avoid resorting to credit to meet your expense. The end result will be less financial hardship for your, and more financial freedom to achieve life goals and dreams.
5. Highlights Trouble Areas
When you keep tabs over your spending, you will be better able to identify trouble areas before they become into a crises. You will know what expenses are draining your bank account and adjust your spending habits accordingly.
On a final note, remember that the way you spend your money will determine your financial well being. If you spend on unneeded and wasteful expenses it will come to haunt you later down the road. It’s vital that you track your spending to avoid financial troubles that may wreak havoc in your life. The little effort will go a long way in ensuring that you don’t get yourself entrapped into debt trouble.