Last week I discussed the need to create a budget to manage money. While a budget is an important part of managing money, there is another component that complements a budget. This component is called tracking money or record keeping. It is one of the elements which is forgotten when people organise their finances.
So, what is this tracking money about?
Tracking money is the ability to keep a record of what one would spend in every day’s life. The tracking includes any small amount of money used. It might sound petty but it is an important part of managing money and the first step in identifying daily expenditures with the aim to achieve a total overall expense record over time. Maintaining the same lifestyle is also important while keeping the track record.
There are a lot of apps that can be used to facilitate tracking money. If not computer competent, a pen and paper can be used to achieve this objective. Where house expenses are shared there is a need to ensure that everyone is on the same page in recording their expenses. Therefore, a book might be placed in the kitchen where it is accessible to everyone to document whatever is used daily.
Six months of tracking money
To achieve a positive outcome of how money is spent and where six months of record keeping is necessary. This time is not too short neither too long but just enough to showcase money spending patterns.
After six months, it is easy to know one’s spending routine and after this, the money tracker becomes a guiding tool to budget-making. The money tracker is also an educator as to where the money is wasted on unnecessary things and this money can be put into savings for different projects.
Some people might disregard tracking or keeping a record of expenses but it is paramount to have a baseline of where to start in managing money. It is very difficult to make a budget if at all there was no tracking of money. Making a budget without first tracking the expenses is like walking in a dark room with the lights off.
What goes in tracking money record?
The whole idea of tracking money or keeping a record of the same is to ensure everything is put down on a paper or an app. The date and money spent including lunch, two dollars donation, coffee, bottled water and any little thing purchased with either cash or credit card need to go into the record. If children are given money for lunch this should also go into this record.
Other essential and necessary expenses must also be included on the money tracking record to provide an overall, outlook of the whole house hood expenditure.
Again, if money is not recorded properly, organising the finances would not be accurately reflected. Tracking money requires dedication, time and discipline.
Agnes has a great job with no children, no house mortgage, no car but lives from pay packet to pay packet and owes the bank six thousand dollars in debt. During a team meeting session, Agnes confided to a friend that she had problems managing her money but she could not figure out where her money was going. The first thing Agnes required to do was to track down her expenses without changing her lifestyle but putting down every penny she spent. After six months, Agnes would be in a better position to understand her routine expenditure and habits.
Using Agnes’s case study how many times have we interacted with people in this category?
I am still writing my book on managing money and these are some of the snippets of what is expected to be found in the book. Please feel free to comment.