Budgeting in the digital age: Why you should track your spending to the last penny
Author: Chris Smith
Managing our money is a lot like juggling. Juggling involves keeping three or more objects in the air while moving your hands quickly and precisely.
Similarly, managing our money requires us to juggle many different accounts and things: checking accounts, savings accounts, credit cards, loans, retirement accounts and so on. Effective money management means keeping all of these moving parts in the air while making sure all the bills get paid on time, and ideally, saving some money along the way.
The following are reasons why you should track your spending to the last penny:
1. Financial Independence
The first benefit of tracking your spending is that it brings you closer to financial independence. Tracking your finances, including what you make and where all your money goes, helps you create a budget and plan how to spend less than you earn – the key to living within your means. By planning out your expenses each month, you'll have a better idea of what you can afford.
2. Effective money management
Live within your means by tracking every penny going in and out of your bank accounts to create a budget that works for you, then follow it. The best budgeting apps are great tools to help you with money management.
They will enable you to save some money, pay down debt and take the steps necessary towards financial freedom. By managing your money in this way, you'll become much more aware of where your money goes.
This awareness will allow you to make changes in your daily spending habits to have more money at the end of the month to save or spend how you choose.
3. Stay out of debt
Making a budget and sticking to it is essential to getting out of debt. Money management apps are excellent tools to help you stay out of debt.
Most budget apps offer features that make it easy for you to track expenses and see your debt or lack of savings. Seeing your financial situation laid out before you allows you to take the appropriate steps to change it.
4. Stay up to date
Financial experts recommend that you review your bank accounts at least once a month. Doing so keeps you up to date on your finances, allowing you to see exactly how much money is coming in and going out of your accounts.
Budgeting or money management apps make it very easy for you to track spending and can help a lot with personal finances. Whether you want to track spending manually or prefer using an app, it's up to you. Tracking your expenses doesn't have to be a complicated process.
5. Saving for your dreams
Saving is an integral part of spending money. If we don't learn how to save money from an early age, it can be challenging to save later in life. We need to develop proper savings habits if we want to live a comfortable life as adults.
You can start saving money using either a straightforward savings account or by opening a regular investment account. To make your dreams come true, you must track your spending and manage your money wisely.
6. Avoid fraud
Staying on top of how much you spend versus how much you make is the best way to avoid fraud and identity theft. Businesses collect data about you when they accept your credit card information. If they see that you're spending more than usual, they'll contact you to ensure that the charges are correct and your identity has not been stolen.
By knowing how much money is going into and out of your accounts, you can avoid becoming a victim of fraud.
If you don't want to be like most people who are stressed about their finances, then learn how to manage money. Track your spending habits and create a budget that helps you save some money every month – especially if you're living paycheck to paycheck.