Why track?

Alicia got me thinking again, as she often does: why do I like to track spending? I don’t do it down to the penny, although I might try that for a month this year just to see if it’s more valuable to me than I think it would be. But I do it in a general way, keeping track via YNAB (affiliate link with $6 discount) and I have found it helpful.

The major reason people usually give for tracking is to discover where the “leaks” are in their household spending. I think a lot of people are stunned to find out how much they’ve been spending on groceries or coffee or what have you. But I’ve been pretty strictly limiting myself to a set amount of food/incidentals cash for months now, and don’t feel the need to drill down into the specifics of it as long as I keep to the right amount of cash.

Personally, I’ve found tracking helpful for two reasons. The first is that it got me to focus on some of my bills that I knew were too big (cell phone, specifically) and really look at how much they were draining from my potential free-spend money or savings.

The second is that I learned that there is no such thing as a normal week or month. Pretty much every single month, something has come up. Medical co-pays, computer repair, car repair, the books I needed to buy for class, a plane ticket, meals out while I’m traveling, a gift or three…. The reason changes every month, but the result is almost always the same: I find myself right up against the limit of my budget, or even dipping into next month’s money. (This is after I hit my very aggressive savings targets; my salary is very reasonable for a single person in a low cost of living town, and if I weren’t having so much withheld for retirement and put straight to debt/emergency fund/travel savings accounts, I would have plenty left over every month.)

When I first started tracking earlier this year, I felt like I spent a lot of time saying “this is unusual, this is a one-time thing,” but now I’ve said that, or variations on it, so often, that I just have to give up: there will almost always be something. The months where there’s something actually left over (looking like November will be one of them, unless something goes dramatically wrong in the next three days) are going to be rare. So the lesson I’ve drawn from tracking over the course of eight months is really just that old chestnut: save as much as you can in advance because you’re going to have rain, every month. A normal month is a month with unexpected expenses; it’s the smooth-sailing months that are weird and rare. To me that’s a useful enough takeaway to have made the whole enterprise worth it.

5 thoughts on “Why track?

  1. With all the talk about YNAB, I think I’m going to have to check into what the fuss is about. I keep thinking I’m going to do a better job of tracking spending to budget so we can see if we actually have extras to throw at our loans (or if we really could have me stay home sooner). Maybe this will be some extra motivation for me.

    1. Well, I’ve really liked YNAB, but it’s a combination of factors: the software is *really fun* if you are the kind of dork that likes pretty software. There’s no reason you can’t fake your own version up with excel or whatever. I *love* pretty software though, so I’ve enjoyed it, and it makes life a little easier. I’m doing a better job of paying attention, basically, because the software makes it easier to keep track of stuff. I will say that I think being a single person helps here — I have married friends who have some trouble using it because both people have to be pretty dedicated to using it (or one person has to be fanatical about checking up on all the finances) in order to make it work.

      It’s not magic though — it’s just about forcing focus and awareness.

      Also, their “system” (live on last month’s income, etc) is a pretty good set of ideas. I haven’t really been doing the sinking funds like they’d like you to, but I see the purpose and would like to get to the point where I could start doing that.

      Stephanie at sixfiguresunder had a good post about using it to help scrape up extra student loan payment dollars that you might be interested in: http://www.sixfiguresunder.com/budgeting-every-penny-zero-based-budgeting/

  2. Yeah, I think there’s something to be said for the habit of it – I just find I liked a bit of the freedom of having $X for everything and just staying within that pot of money. It felt less rigid and like I wasn’t desperately deprived. Tracking every last dollar in that discretionary account makes me feel a bit amateurish, like I’ve reset back to the beginning of PF knowledge. Rational? Nope, not at all, but true all the same.

    You’re right though – something does always come up. For me the past two months my car has been kicking my butt. And I actually do track those planned spending expenses. So I guess I wasn’t as badly off as I thought – just not in the breakdown of groceries vs gas 🙂

    1. Hah, I can see how you’d feel like “wait, I know better than that! I’m a veteran at this stuff!” I never really have tracked everything, like I said; I kind of knew that the big problems were rent and food, and I dealt with one by moving to a cheap city (that was outside of my control, because the job was where it was, but I got lucky) and the other by going to a monthly pot of cash. I also like my “slush” line item, which allows me to handle the random stuff that comes up. I don’t have tons of sinking-fund lines in YNAB for professional expenses or meals out or whatever because I just draw what I need from slush. Budgeting $20 for entertainment and $30 for eating out or whatever it would be just feels too inflexible to me right now. I might change my mind if my income increases and I want to start building up sinking funds so I can spend guilt-free on a big restaurant trip or whatever.

  3. Graham Clark says:

    Great article and I completely agree. Budgeting and tracking (in personal finances as it is with businesses) is designed to give you an understanding of where you are spending your money, and areas where you can reduce this spending to improve your bottom line.

    As you say, it also helps you greatly deal with the ups and downs as you can budget for average “unexpected” items like car repairs so that you aren’t continually raiding and refilling your emergency fund for these things which aren’t really “emergencies” but rather just variable, non-monthly expenses.

    On Monday 1st December (tomorrow), we are launching Moneystepper’s 2015 Savings Challenge, which from the feel in this post is something that you could be interested in. We are trying to build a huge community of people striving to improve their savings rates and net worth through working together towards these shared goals.

    Come check us out tomorrow – I would love to have you involved in the community!

    Graham (moneystepper)

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