Track Your Spending - It's Never Been More Critical
For over two years, the effects of the pandemic lead to widespread economic and, for many people, a drastic change in lifestyle choices. Throw the recent surge in inflation and cost of living into the mix and it has become more important than ever to keep track of your spending. After all, this is one of the few methods for safeguarding your savings that remain within your control during what is a highly volatile time in markets across the globe. Let's break down what an expense tracker is and how you can use one to optimize your spending habits.
What is an expense tracker?
In order to improve your spending habits, you need to know both how much money you're spending and where it's going. An expense tracker is a system that helps you to do so. Expense trackers come in many forms — a basic version would be a list of all your expenses on a piece of paper while more sophisticated systems include automated software that tracks your expenses for you. In order to guarantee that you remain on top of your spending habits, an automated expense tracker is the way to go.
Envelope budgeting
One of the most tried and tested forms of expense tracking is the envelope system. Here, you start by taking your salary and converting it into cash. With your cash on hand, take a bunch of envelopes and think of the different kinds of expenses you have each month. For example, you could divide your expenses between "needs" and "wants" or by category, eg. food, healthcare, spending money. You then place a pre-determined amount of money in each envelope depending on your spending habits. While an effective form of self-discipline, we all know that cash is not used so commonly anymore, making this system outdated. Fortunately, there's more than one way to budget.
The problem with manual tracking
Remembering to manually write down all of your purchases after making them is not always the neatest method of expense tracking. After all, your expenses could come in many forms, from invoices to store receipts and online purchases. What's more, you could be a highly organized person who simply forgets to write down one of your expenses, thereby missing a crucial part of your budget through a simple mistake. To help you avoid such slip-ups, you could consider going digital with an automated system. But how do you start?
How to automate your expense tracking
Automated expense tracking is primarily performed either by mobile apps or computer software. Apps such as Mint and Goodbudget connect to your credit cards, bank account, and other payment platforms in order to track your expenses in real-time. This means that you'll save the time and effort that would otherwise be used on physically recording each expense while also guaranteeing that you never miss a single expense through human error. What's particularly helpful with these apps is that they categorize your expenses so you don't have to, grouping them into categories such as restaurants, entertainment, education, personal care, and bills.