Do you have to track your spending forever?

Some people resist the idea that they should track their spending forever. But what else gives so much benefit for a small amount of work?

I once had a client ask me when they could stop tracking.

They said, basically, that they got the point, and yes, it was good to see what they were spending, but now they wanted to be done with the exercise and move on with budgeting.

It was a curious question to me, as it seemed almost circular (stop budgeting to budget?) but I always need to remember that I’ve been living this stuff for years, so what feels like normal to me is not always normal.

But it made me think: do you have to track your spending forever, or is there another way to achieve your financial goals without it?

Let’s explore.

What are we tracking?

Here’s the 3x speed version of how you succeed with money on a monthly basis:

  1. Figure out how much income you have in a given month.
  2. Subtract your projected bills. Everything that remains is your expenses. (Here’s how to know what’s a bill.)
  3. Divide your total expenses into categories (groceries, restaurants, etc.).
  4. Track your spending such that you keep to those targets.

Do this and you will never wonder where you money went ever again. This is the single most powerful action you can take to change your financial life forever.

Why track?

But why?

We track our spending for lots of reasons. So we know how much we’ve spent in a given month, to tell us how much more we have to spend. To know how much money we have in the bank. To feel more in control.

The important point here is that tracking your spending gives you visibility into your finances. No other tool is so simple and yet gives you so much understanding of your financial situation.

Bank statements can’t really do this. First, they don’t divide into categories accurately (how exactly would you count a Target run, or an Amazon purchase?). Second, they are mostly passive, and you have little agency over what happens. Third, this only works if you only use a single account for everything, which almost no one does.

And if you’re going to bother with You Need A Budget, manual tracking is actually simpler and easier, in my opinion.

And as we all may remember from school, taking notes can help you learn better, and retain more information. So tracking is the “note taking” of personal finance.

Can you stop tracking?

People tend to think of a “budget” in the singular, like there is one perfect amount of money you can spend on things, and this is true now and always.

Unfortunately, there is no such thing. Every month is different. Your birthday only happens once a year. Summer vacation only happens in one season each year. The one conference you had to buy a new outfit for might only happen in one month.

Every month is going to be different.

But even if it weren’t true, even if you could somehow make one budget be identical every month going forward, how would you know where you were in the month, spending-wise, if you didn’t track?

Let’s say you gave yourself $500 for groceries. It’s now the 20th of the month: do you have enough money left to go for a grocery run? How would you know?

Yes, you could use your bank account to do that, but remember the above problems. Online banking is great, but it can’t do everything for you. Any tracking it does is going to be incomplete at best.

Bottom line

I’ve been tracking my spending for over 20 years. When done right, it takes about three minutes a day, sometimes less. That isn’t too onerous.

You don’t have to do this, of course, but here’s what I’d say to those who wish to not track their spending: if you can know where you are, spending-wise, at a given point in the month, without manually tracking, then go for it.

Personally, I’ve never found a way to do that. But if you do, let me know!

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