100 Words On: The Importance of Tracking Your Expenses

It’s true; there are many folks out there who successfully manage their household finances without ever using a budget. That being said, most of those people still track their income and expenses. That’s because trying to get a handle on your personal finances without knowing how much money you are earning and where it is all going is tantamount to trying to drive while blindfolded.

The bottom line: Taking the time to analyze your finances is a crucial element of managing your personal finances. Doing so uncovers hidden money leaks that help you better allocate your resources and ensures you get the most out of your income.

Photo Credit: Gastev

14 comments to 100 Words On: The Importance of Tracking Your Expenses

  • I’m one of those people who don’t use a budget, because I don’t care which category my money is spent in. But, I do know how much is coming in, how much is going out and where it’s going. I have always been very good with numbers and doing them in my head isn’t a problem. Also, my income and expenses are relateive stable.

    Most important, I save a big chunk of my paycheck, before I spend a single dime.

    • Len Penzo

      As my income has risen, we’ve basically stopped budgeting — but we still keep meticulous track of our expenses too, Bret.

      And I agree; having your savings and as many bills as possible deducted from your paycheck helps a lot when it comes to getting by without a budget.

  • Budgets are a road map to your financial goals. You need to know where you are now so you can achieve your goals. It is a s simple as that!

  • I can’t imagine not having a budget. I’d be back to square one; over drafting my bank account and not knowing where all my money went! I’m so glad I figured out long ago how to make a budget and stick to it (for the most part. ;) )

    • Len Penzo

      Budgets were really important to me when I was making a lot less. I couldn’t have managed my finances without one, but I know lots of folks who really think they are not necessary. But that’s why it’s called “personal” finance, right, Jen? ;-)

  • I like the way krantcents put it; budgets most certainly are a road map to our financial goals, and the more careful we are in our planning the more detailed our navigational resources will be along the way. More power to the folks that can get by without an established budget, but I for one know that I will continue paying close attention to mine as I work towards financial milestones along the way.

  • Len Penzo

    Regarding the road maps, we do still budget for what I call “strategic” goals — that is, big stuff like vacations, house remodeling, etc.

    We just don’t do it for the more “tactical” stuff anymore like groceries, clothes and utility bills. I think the only thing we still try to budget for on a monthly basis is eating out at restaurants, if only because those costs can really escalate quickly if you’re not careful.

  • Spedie

    I cannot ever imagine not having a budget. when I was 12 years old by a month, I had to pay rent, due on the first, every single month my evil Dad and his crazy wife.

    As more stuff and life happened, I always waited to have the money, on the first of the month, always…now for over thirty years. I not only had a budget, but I lived a month ahead from the beginning of my money making career, let it be mowing lawns, etc. I did not like to babysit, and I am female, bur I would do it occasionally for the cash.

    I am forty eight.

    I have lived my whole life in a budget, there is no free for all at my house.

    I will not put down my potential retirement because I spent money at Starbucks, etc. I know where every penney goes, and always have.

    Spedie, the just about millionaire..

    • Len Penzo

      You’ve really got your act together, Spedie. That’s awesome! Let this be a lesson to all you folks out there who think budgets and tracking expenses aren’t important; they are!

  • I adore the parsimony of your writing. Well put. Budgeting gives a sense of control, and who doesn’t want financial control?

  • I don’t budget as frequently as I did a few years ago, but I still feel the need to write down where I want my money to go at least once a month. It makes me feel powerful over my money. Also, I do think it’s important to know where your money is going. For instance, I want to know I’m spending $700 a month on food. That lets me know there’s possibly some waste or mindless spending in that category. Obviously, money that’s not put to its optimal use can and should be allocated elsewhere.

  • I think budgeting can be simplified to tacking two categories:
    % Saved
    % Spent

    You can divide the % Spent up into categories to try to optimize them and get a higher %Saved, but if you are happy with your %Saved you don’t need to, and after you have optimized your spending once there is much less to gain by doing it again.

    If you make the % Saved automatic (i.e. payroll deductions & automatic transfers) then you just have to make sure you spend less than you earn. I find it is fairly easy to keep an eye on my bank balance for that- any time I come close to $1000 left I need to cut back on spending for a while. If the balance drifts up I can spend a bit more.

    -Rick Francis

  • [...] Len Penzo reiterates the importance of knowing where your money is coming from and where it is going.  I think I know where most of mine goes, to Thing 1, Thing 2 and Thing 3… [...]

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