Everybody knows that they ought to save, but finding the money to save is one of the challenges that many people experience. In fact, many people end up with more month at the end of the money, instead of the other way round. As they are tight on cash, they may choose to take on loans. One can find the best personal loan interest rates in Singapore here.
However, this can change of course, and one can become a great saver and eventually even a great investor. However, where does one start? Well, one has to start by finding the money they need to save by analyzing their expenses and figuring out what they are spending on. That is where tracking expenses comes in. This is a tool that can help one change their spending habits and get them started on saving. Here is how to start with monthly expense tracking:
- Write it all down. Personal finance management not only includes writing down financial goals, but it also includes writing down what one spends on. Alternatively, one can use one of the many available apps that help with expense tracking. Writing down every expense, even the really small ones, gives one an idea of where their money is going. It also enables them to know where they can cut on their expenses to find the funds needed to save.
- Read through account statements. It’s amazing how many people grab accounts statements, look at the amount due, and forget about it. The statement is actually a great personal finance tool. By looking through it, one is able to take note of spending habits, especially if they make purchases using their credit or debit cards. It also gives one an idea of how much money they are actually spending from month to month. Having a clear understanding of one’s income and expenses is critical for budgeting purposes as well.
- Break down expenses into categories. This means grouping fixed expenses, variable expenses, and money for discretionary spending separately. By doing this, one gets a good idea about what their needs are, and what their wants are, as well as how much they are spending on them. Items such as rent or mortgage, debt payments, insurance payments and utilities usually fall in the fixed expenses category and generally cannot be manipulated. Variable expenses include the cost of travel, clothing and food. These bills can be reduced with proper planning and wise shopping to ensure that one is able to save. Discretionary spending includes the money one spends eating out, going out with friends, paying for club or gym membership and the like. This is one area that can be trimmed quite nicely to provide money for saving.
- Be consistent. One of the best things with using technology for personal finance management is the fact that apps can be used on the go. With a great app, there is no excuse. One can allocate funds to be used for the month and create a budget on there as well that they should stick to. Most of them will give enough features for one to actually use them consistently wherever they are, but if one is looking to unlock all the features on the app such as syncing bank transactions, then a small fee is to be paid. With an app, one is able to track their expenses throughout the day, wherever they are.
- Identify opportunities for change. The whole idea with expense tracking is to identify where one can make changes for better financial management. By doing this, one is able to see where there is wastage and curb that loss. It is also a great opportunity to find out where adjustments can be made as far as necessary expenses are concerned. For example, if one is living in a more expensive neighborhood, they may consider moving to a lower income area and use the excess money to save for a down payment on their own home.
Once one has tracked their expenses, the next step is to set relevant goals for paying off debt and saving before moving on to investing. Ensuring that one has personal finance goals is a great motivator, so one should ensure that they are working towards something that is a big reward for them. It is important that the initial goal be a small one so that it is easier to achieve. However, once that one is achieved, achieving the next one will be easier. Additionally, the satisfaction that comes with meeting a goal will spur the saver on to bigger and better things.
Tracking expenses gives one a reality check and that realism should carry one into all other aspects of financial planning. This means setting a realistic budget and sticking to it, and also setting realistic and achievable savings goals. Tracking expenses should continue until one has a handle on their finances and knows just how to manage their money. From time to time, should one feel like their finances are going out of control again, they can always come back to this excellent money management tool.