Tracking Your Expenses

One of the reasons many consumers overspend is because they don’t track their expenses, so they are clueless about how much money they have except for perhaps soon after they get paid. If you use only cash or your debit card to make purchases, being out of cash will become noticeable when you go to the ATM machine to withdraw some money and there’s not enough or when you’re at the checkout line and the cashier announces the dreaded news: “Your card is declined.” At that moment, it becomes apparent that you have no funds in your account to pay for your purchases. 

On the other hand, if you use credit cards to pay for almost everything like I do, and your cards are maxed, you may be able to use your debit card, assuming you have money in your bank account to pay. But if all your cards are declined, you’re in deep, deep, you know what, because that would mean your credit cards are maxed, you’re in debt, and you have no money to pay for your purchases.

Tracking your expenses and account balances will prevent embarrassing situations like these, since you will always be aware of your expenditures and how much money you have to go around. The big mistake some consumers make is believing that their credit card is an extension to their bank account. Hence, they spend the money in their account and still use the credit card, knowing very well there’s no money left in their account to pay off the balance. 

With not enough funds to pay off the bill, they likely make only the minimum payment monthly, which puts them into deeper debt each month. And unfortunately, credit card debt is the worst debt to have because the interest rates are high and there are hidden charges that never seem to be traceable. When you make tracking your expenses a habit, not only will you know what your spending to date is, it will likely deter you from making unnecessary purchases and getting into unwanted debt.

Here is a list of some strategies ideas that you can use to track your expenses:

1. Create a budget and keep updating it as is necessary. A budget not only helps you to track your income and expenditures; it also helps you to see where the bulk of your money is going each month. 
2. Record all your expenses in your budget, and adjust your income balance each time you make a purchase. Some expenses such as rent, mortgages, insurance, and car payments are fixed every month, so those can be entered first. The variable expenses, such as groceries, transportation, and entertainment, are the ones that you really need to pay close attention to.
3. Stay on top of your variable expenses. If you find that one month you’re overspending in one category, and it’s unavoidable, you may want to cut back in another category so that you’re still staying within your budget.
4. Buy smart – look for coupons, discounts, sales, price matching etc., especially when you have to make larger purchases.

Having an emergency fund will certainly help when you have large purchases but I don’t recommend that you use all your savings for big expenses all the time. Sometimes it’s better to see where you can cut back for a few months to cover those expenses first. The effective use of your credit card can also be helpful too, because you get the no interest grace period before you have to pay your balance. This affords you some time to pay for your purchases over multiple pay cycles without having to pay an interest penalty.

Why Buying Smart Helps

I’m not a fan of cutting out coupons, and to be honest, I sometimes get impatient when the person ahead of me in the check-out line has a bunch of coupons that the cashier has to read to ensure they haven’t expired. With the advance in technology, I think suppliers can do a much better job of helping consumers to save a few bucks (Costco has a good system to handle coupons that removes the hassle). But for those who are okay with cutting out coupons, this is certainly a way to save on purchases.  

There’s also a bunch of flyers that come in your local newspaper each week, with the items on discount and the participating stores. And if you’re like me and don’t like flipping through papers, I have an app on my smartphone, called Flipp, which allows me to click on the store where I’ll be shopping, and it shows a list of items that are discounted, and the time frame. With this app you can compare prices at different stores too, and see where you can get the cheapest buy, and even ask for a price match.  

Something I discovered when I was checking out the app was that you can actually click on the items of interest and it populates your shopping list. And if you click on items from multiple stores, the items in your list are compartmentalized under each store. So your shopping list shows only the items you need thus preventing spontaneous buying. And unless you’re rewarding yourself for good deeds done, avoid buying nice-to-haves unless you have enough cash to cover such purchases. If you’re using credit cards to purchase things you don’t need and cannot afford, that is a sure way to get you into debt very fast. 

Moreover, before making a purchase, especially an expensive one, it’s always wise to do some homework first. Identify what you plan to buy, and determine if it’s a need or something you just want to have. If it’s just a nice-to-have, and not a necessity, perhaps you should reconsider making that purchase. If it’s a need, however, decide on how much you can afford to spend, and then research the product, prices, and suppliers. Compare prices among suppliers, and since

quality is key, it’s prudent to read reviews on the product, and on the return policies of the suppliers.  

As some online reviews may not be useful, it’s good practice to ask people you know for recommendations. Buying goods and services on sale or off-season can be very beneficial. Many department stores offer regular family and friends discounted days that I capitalize on. Some higher-end stores also offer huge discounts at the outlet malls or during certain seasons. Two of my favourite stores, Victoria’s Secret and Bath and Body Works, have two semi-annual sales each year, and the deals offer great saving opportunities. Some stores offer significant reductions on items from the previous year, even when the items look exactly the same as

those in the current year. This is similar to how a car dealership sells a 2020 model of a car, cheaper than the 2021 model, even though both models are identical. 

These are just a few examples of how you can keep track of your expenses. There are various other strategies that you can use. Despite the strategies you use, what’s most important is that you make smart choices when you’re making purchases and keep on top of your expenses because doing so will definitely prevent you from overspending and keep you out of bad debt.