Tracking is Your Friend

A new year is here. It is interesting how our human operating system is so tied to clocks and calendars. 9:00-5:00, Monday through Friday, monthly, quarterly, and annual cycles, Sunday religious rhythms. There is something special about the turning of a new year that feels like opportunity is within reach.

I am going to take this opportunity to make a suggestion. Track your spending. I am not talking about budgeting. I’m not even talking about changing your spending habits. I’m not suggesting eating out less or doing away with Starbucks in the morning. My recommendation for 2021 is to just track.

Make it Easy

The benefit of today’s world is that tracking is easier than ever. There are so many sophisticated applications available that tracking could only require one hour of your time a month. Here’s the key: do not get caught up in the word “budget” or the budgeting task that each of these applications suggest. Budgeting is time consuming and can be rather difficult. Tracking is just categorizing what you have already spent and taking 15 minutes a month reviewing those categorized expenses. That’s it.

I use You Need A Budget. The name is a turn off and I actually do not use the budgeting tool at all. I login a couple of times a week, import the transactions, categorize them, and look at the Income v Expense report that shows monthly spending by category. Minimal touches keep you from getting frustrated and throwing the whole process out the window.

The Impact

A study from a couple of years ago found that when Personal Capital released their mobile app, users went from checking their dashboard 2.14 times per month on the website, to 12.47 times per month on the app. The study also found that users spent 15.7% less in the months after downloading the app. What might this mean? There was no New Year’s goal to drastically cut spending or change lifestyles. This was just people checking in on their dashboard more frequently. Consistent tracking produces results.

Why Not Budget?

I dislike the word budget. It implies a restrictive fence. No one likes to be restricted or constrained. Also, budgeting is cumbersome. If budgeting works for you by all means keep budgeting but the people who typically set a New Year’s resolution of budgeting have never tracked their spending, so they start by sitting down with their spouse and saying, “what is our budget for groceries this next year?” The response is typically a blank stare because neither of them has a clue what they are spending now so how can they budget for next year. I encourage you to not put the budgeting stresses on yourself and just categorize and track for the entirety of 2021.

You Got This

The beautiful thing about human beings is that we are all different. Different tendencies, preferences, and operating styles. There is no one size fits all.  Right now, you are reading a blog by a CPA suggesting you track something, shocker. Your tendency might not be to track but I think you will see a real return on your invested time in this process. This return is more than dollars saved. It can bring peace to the topic of finances, help facilitate conversations with spouses and children, and enable good stewardship habits.

“What gets measured, gets managed” – Peter Drucker

You got this.