Tracking your spending is one of the important factors in getting a budget to work for you. If you don’t understand how money you spend each month, you’ll never know if you overspend. Even the smaller expenses and subscriptions can add up and cause you to go over a budget.
There are various options available to track your spending. One of the simplest is a written journal, also known as “pencil and paper” or the tracking method. This method has been around for thousands of years, since the earliest days of ancient cuneiform writing, but these days it’s much easier to set up a personal finance tool or budgeting app to automatically track your spending.
A budgeting app makes it much easier to track your spending. In fact, by analyzing your spending patterns and tracking your net worth and investments, Fion can even suggest better ways for you to maximize your income and spend more intelligently.
After tracking your spending, should you even set up a budget? One advantage of keeping a budget is it reminds you save enough money to pay your bills promptly and on time each month. Paying your bills promptly means you avoid paying interest charges and late fees.
However, it’s more important to track your spending than to set up a budget. Seeing all your purchases in one place will motivate you to be more mindful of how much money you’re spending and where you’re spending it, even without a budget.
If you do decide to make a budget, you should once again go over the last six months of your bank activity and credit card transactions to determine your typical spending patterns. Fion will do this automatically for you.
You’ll likely find some areas where you can improve your finances. If you decide to keep a budget, remember to plan for irregular and unforeseen expenses. You should also make sure to examine your budget plan every few months or whenever there is a substantial change in your income or expenses.
The first, and most important, step to spending intelligently, with or without a budget, is to track your spending.