If You Want to Build Wealth, Track Your Expenses

Originally posted on Money with Merne’s Facebook Page on May 15, 2017:

So when I first started being more proactive in my personal finance coaching mid last year, I told the folks I was working with “I track my income and expenses down to the penny every month, but this probably isn’t realistic, so maybe just do it for a month or two to get an idea of your spending to inform your budget.” However, as I’ve flown through several finance books and read lots of articles (especially while collecting material to post on this site) I’ve come to believe that tracking your income and expenses EVERY month is one of the keys to financial success and building wealth.

Here’s why:
1. Numbers don’t lie. Your spending is right there in front of you. You can see how much you spent on going out to eat or the bar and think about whether that’s what you really want. If not, you can vow to change it.
2. You can’t overspend. When all of your expenditures are written down, added up and are less than your income, you know you’re not going into debt. This is why I can use a credit card for everything and pay off the balance every month. I track every expense in my spreadsheet!
3. You can see how realistic your budget is and make tweaks if necessary. Saying you will only spend $100 on take-out doesn’t matter if your actual expenses show you’re spending $300! Either change the budget or change your spending.
4. You can see exactly how much you have leftover to SAVE! If you’re one of those people who likes to have a cushion in your checking account, you may not really know how much is leftover, but the income minus expenses shows you exactly how much and you can be sure to funnel that money to savings or debt repayment or investments!
5. You can see how you’re progressing with your goals! Tracking your net worth on a regular basis can show you how your debt is decreasing and/or savings are increasing. What great motivation!

So if you really want to transform your finances, track them! Remember, there are lots of great apps out there to make it easier versus just entering numbers and formulas into a spreadsheet (even though that’s my preferred method because I’m a spreadsheet nerd).

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