Being on a budget equals tracking expenses. There is no way around it. Unlike people who can throw money out of the window, we can’t afford this luxury. But why is it so important to track your expenses?
1. You won’t explode your budget.
With a low budget, every penny (or the equivalent in your currency) counts. By tracking your expenses, you will know exactly how much you spent and how much you have left.
This will prevent you from exploding your budget. Moreover, by knowing how much you have left, you won’t meet bad surprises due to reckless spending.
The problem with not tracking your expenses is that you increases your chances of spending more money than you can afford. This is why some people end up in the red–i.e. owning money rather than earning some.
2. You can make smarter expenses.
By tracking your expenses, you can make smarter ones. In my previous post, I talked about comparing prices between items to buy the cheapest ones. This is one way of making smarter expenses.
In order words, by tracking your expenses and knowing how much you have left, you open the doors to new opportunities, choices and decisions. You can reallocate your remaining budget, determine what you can and cannot buy, change previous financial decisions, etc.
You may notice that you spent too much money on something and thus decide to change your entire financial strategy. Or you may think that because you didn’t spend too much money on groceries, you can buy the nice clothes you’ve been wanting to buy for a few months now.
To sum up, tracking your expenses will allow you to make smarter decisions that would have been impossible had you not known how much you’ve already spent.
3. You will be able to save money.
The best reason to track your expenses. Saving money is important for any student on a budget. In fact, it is for anyone on a budget.
As I mentioned above, every penny counts. It isn’t uncommon to end up with a few pennies left at the end of the month. Instead of throwing them away, how about saving them instead? Save $0.5 per month and you end up with $6 at the end of the year. Do it for 5 years and you will have $30.
Not much for you? How about $10 per month? You would end up with $120 in 1 year, $600 in 5 years. Way better, right? But is it possible to save that much money per month?
Yes, it is. That’s why you track expenses. I told you above how you can SPEND money in a smarter way by doing so; what I didn’t tell you is that you can track expenses to determine how much you will SPEND and how much you will SAVE.
It’s your budget. You are free to decide how you are going to spend it and how much you would like to save. Determine first how much you would like to save per month, then determine how you are going to spend the rest.
Another approach you can take is to determine approximately how much you need to spend, and save the rest.
No matter what approach you decide to take, start saving money now and build your own wealth.