I’m not sure if people get this, I know that I didn’t get it when I first started, but you track your spending habits so that you can plan your financial future. So much focus seems to be on tracking and budgeting that the most important part, the planning, gets thrown out the window or left for “when you have time,” but that’s just backwards. This goes back to your money mentality discussed in previous posts. Your mentality is the greatest single factor in your wealth, and you can’t direct your mentality if you don’t plan or consider what direction matters to you.
Tracking seems like the natural option to come first, but it shouldn’t. But, how can you plan if you aren’t tracking? You don’t know where you are now, so how does planning work? At this stage, it’s probably more about wishful thinking until you actually know what your spending habits are, and if you aren’t tracking, then you could be very surprised about how much goes to certain purchases. Setup expectations about where you think you’re spending your money and allow yourself to be disappointed if you’re off, and encouraged if you’re not. If you have enough unconscious sense about your spending habits to be on mark or above without trying, then you’ve likely instilled good spending habits into your personality.
Expectations are a good general measure for figuring out what you need to investigate if your expectations aren’t met. I focus on how much I’m able to save and invest at the end of each month. If I don’t hit my average mark, then I know I should look at what’s been happening that’s thrown it off. Maybe I threw a big party and spent a bit more because of that. Maybe that’s OK, or maybe it’s something that’s not. You don’t have to track every minute and second of what you’re spending habits are and where you’ll be at the end of the month. If you can’t naturally control your habits and just come out on top each time, then there’s something wrong and usually it’s your mentality.
While I talk about month end expectations, the more important point is with your long term planning. The devil is in the details, but if your adrift with no plan, then tracking does you no good. What is there to learn? What is there to improve? Why change anything if there isn’t a longer plan in place? Do you want to buy a house in 5 years, or a new car, or save some for kids, or vacation, or just be more financially secure? There are plenty of choices, but if you don’t pick one and set your sights on it, then you might as well just not track your finances because you’ll just be wasting your time (as long as you can pay the bills while doing that).
Plan long term, big picture first, then track second, and make your monthly habits naturally controlled. The tracking that goes on is a backup in case you just didn’t notice a new spending habit taking over, and it’s great if you want to figure out how you can squeeze out more money for saving and investing with what you have already. However, don’t let the dullness of tracking keep you from the important task of having a good look forward.