Keeping Track Of Data and Expenses
Many people cringe at the thought of their expenses and stay away from keeping track of them because they are too scared of what they will discover. However, keeping track of your expenses is very important because of many reasons. Most often, the best way to make sure your bookkeeping is up to date is to use a bookkeeper, depending on your area, like such as, xero bookkeeper northern beaches. However, if you are not running a small business and think that you do not need to keep track of your income and expenses, you would be very wrong. Below, you will discover that keeping track of your expenses is not difficult and that you do not need to be a good financial manager to do it, and you will discover why it is so important.
You can use software – or do it manually
Today, most people use credit or debit cards to pay everywhere – from grocery stores to shopping on the internet, and many people have opted to have their bills paid automatically. If you rarely use cash, it is very easy to use software or a smartphone app where you can input the data of your expenses and have the software automatically keep track. However, if you often use cash when paying for gas or groceries, you should make sure to keep all of your receipts. If you do not want to use a software, you can keep track of your expenses manually. All you need to do is carry a small notebook with you and input your expenses every day. After a month, you would be ready to analyze your expenses and create your minimal and ideal budget.
Analyze – fixed and variable expenses
Before you can reap the benefits of tracking your expenses, you need to analyze them. There is no need to conduct a financial bookkeeping analysis. In fact, it is quite simple to decide which of your expenses are constant, like mortgage, rent, utility bills and other bills that you need to take care of every month. Then come the variable expenses, the money you spent on food, clothing, transportation, and other things. You need to analyze which of the variable expenses were necessary and which of those expenses were not necessary, so that you can work on avoiding them. Remember that your variable expenses will differ from week to week and month to month. What you need to discover with the analysis is whether the unnecessary expenses were too high and what changes you can make to avoid them in the future.
One of the benefits of keeping track of your expenses is discovering splurging habits. If you have a habit to splurge on shopping trips to the mall, or get expensive dinners four or five times a week where you cannot really afford to so. Moreover, while it might be difficult for you to discover that you tend to go on splurging sprees and create unnecessary expenses, now that you are aware of the problem, you can work on changing it and saving more money for the future home you have always wanted or your dream vacation. Keeping track of your expenses simply forces you to look at your spending habits with a critical eye, and once you have done so, you will be able to hold back from splurging and save the money instead.
Discover fraudulent charges on time
You cannot rely on your bank to contact you if there is a possibility that your card has received fraudulent charges. The biggest reason is that the bank will contact you only in specific situations, such as, if you have spent a lot of money or withdrawn a large sum from an ATM. In any case, keeping track of your expenses via your bank account and credit card statements will allow you to know where your money is going. You will know whether you have paid twice when purchasing a single item, whether an auto-pay charge is still active even though you have cancelled it, or whether you are a victim of credit card theft. When you keep track of your expenses, you will discover these issues immediately, which will make them easier to resolve. On the other hand, if you do not discover the fraudulent charges on time, you might fall into bankruptcy (in the most extreme cases) and you do not want to have the money you have worked hard to earn stolen.
Financial goals and contingency plans
Do not rush into setting up financial goals immediately after the first month of tracking your expenses. One of the greatest benefits of being constantly on track of your expenses is knowledge. You will know, at any given moment, the health of your finances. Once you have determined your minimal and ideal monthly budget, you can start making plans for your financial goals, life goals, and make contingency plans for unpredictable situations, like losing your job or need money for unforeseen reasons. As we presented above, you do not need to be a mathematical genius to keep track of your expenses because it is not a difficult task. If your expenses are higher than your income, you can work on spending less and creating your ideal budget every month, which means your financial situation overall will improve. You will be able to plan your dream vacation with ease, and know from the start how having a baby or quitting your job will affect your financial health.
The biggest benefit of keeping track of your finances is not stressing over money and your expenses anymore. Of course, it will be difficult at the beginning to accept the changes you will need to make in your spending habits, which will cause changes in your lifestyle. Nevertheless, in the end, you will no longer stress over your monthly bank statement and wonder where your hard-earned money has gone. You will know whether you can afford something or not, and most importantly, you will not fall into debt and you will improve upon your overall financial health.