Why You Need to Track Expenses Even If You’re Building Wealth

We’ve kicked off our No-Spend January, and I’ve been thinking a lot about the last time we did a no spend month and what we learned from it.

There was no bigger takeaway than the fact of how very, very important it is for people to track expenses in addition to tracking your personal balance sheet and keeping up with your account balances. If you struggle with money, tracking expenses and budgeting can improve your financial picture by helping you live within (or even below) your means.

But what if you’re doing okay? If you live comfortably with minimal debt and you’re building nice savings for retirement and other future expenses?

You won’t be able to do it as successfully if you aren’t tracking expenses.

I know. Until October 2015, when we launched our last no-spend month, I wasn’t tracking expenses, and I’ve been kicking myself for neglecting that little task ever since.

Why Tracking Expenses Is Key

For years, I put money management on auto-pilot, but I didn’t realize it. If you’d asked me, I would have said that I was careful with money. After all, I saved money on a regular basis, both in retirement accounts and other investments, There was always extra money in my checking account. I even balanced my checkbook religiously.

So if you asked me how much I spent on my cable bill each month, I could tell you. And I could probably have given you a rough idea of how much I was spending on gas because I almost always used my debit card to purchase it.

Cash spending was a mystery, though. I’d get cash back from the grocery store, and it would look like a grocery expense. If I received a reimbursement for some work expense, it just got cashed and spent rather than tracked. And these were not infrequent occurrences or inconsequential sums.

Until October 2015 I had no idea what I spent on takeout, coffee, or any other impulse buys I bought with cash unless I needed to track the expense for tax purposes.  And I had no way to figure it out because I tracked account balances rather than tracking expenses as well.

I lived within my means. I didn’t accumulate too much debt. My net worth went up and I was building wealth.

But I wasted so many opportunities to do more with my money.  Not tracking led to impulsive spending, and impulsive spending meant fewer choices, both then and now. 

Since we started to track expenses, my small family lives comfortably on less than I spent as a single woman. We can do that because now we can see the leaks.

Once We Tracked

I suspected going into our 2015 no-spend month that we had some questionable spending habits. I was new to the personal finance community, and ideas about what you could do with frugality excited me.

One of my goals for the challenge was to start tracking expenses. I wanted to know how much we were saving with our frugal month, and the only way to figure that out was to compare what we spent in during the month to what we spent before and after.

It was a great time to set the habit. We had way fewer transactions to record than usual, which made the process easier.

By the time I went back and started entering my numbers from the previous month, I could quickly zoom in on some problems. For instance, I was spending far more on groceries than I thought, even accounting for the cash back I regularly got. Those extra trips during the week added 25-30% more in expenses than I had thought. I quickly realized that the trips to our local warehouse clubs didn’t actually reduce any other grocery spending, either.

Plus, I realized that I had completely forgotten to budget for things like birthday presents. Necessary, but better put as its own category rather than lumped into “entertainment” or “miscellaneous.”

We may not have spent more than we had, but there were places we could cut to pay for other priorities,

Why You Need to Track Expenses Even if You're Building Wealth

How We Track Expenses

A lot of bloggers use apps to track expenses. Not us.

While I think apps are cool, we do things the semi-old-fashioned way. On a spreadsheet.

So pretty much every morning, I enter any expenses from the previous day. Cash, debit or credit card, it all goes on the same sheet, along with where it was spent, what we bought (roughly), budget category, and who initiated the purchase. If i don’t have the exact amount on hand, I’ll put a rough placeholder number until I can get hold of the receipt or the statement. It’s usually within a few dollars and helps keep me honest.

About once a week I’ll scrounge through my purse and ask Jon to check his wallet for any missing receipts. We go through our account statements monthly to make sure all our expenses are reflected on our tracking sheet. We also adjust all those estimated numbers to reflect actual numbers.

Once I’m pretty sure that all the expenses for the month are in, I’ll run a pivot table report to get my expenses for the month and year to date so that i can compare them to our budget. Then I paste the monthly data into a month to month comparison sheet.


Why We Don’t Use an Expense-Tracking App

But why, you may ask, don’t you use one of those expense-tracking apps? Wouldn’t that be easier?


We have a couple a couple of reasons for being spreadsheet nerds. The first is that my money is not just my money, it’s our money. And Jon is not comfortable with the idea of tracking financial numbers in the cloud more than necessary.

I know, you can go look at wonderful posts at Bayalis is the Answer that explains perfectly why you don’t need to worry about the security of Personal Capital. And lots of reliable bloggers are happy to tell us about their great experiences with it and other expense-tracking apps. But we all compromise with our spouses on some things, and my spouse doesn’t trust keeping everything in one web-accessible place.

(Even our personal balance spreadsheets are kept on a flash drive rather than on our hard drive.)

The other, though, is probably more important. If you use an app to track expenses, it’s really easy to 1) ignore your cash expenses, since a lot of them pull data directly from your bank account transactions and b) ignore the reports.

Just like I used to ignore all the expense reports Quicken used to generate for me when I used it to balance my checkbook. Manual entries and manual reports help me pay a lot more attention to our spending, spending trends, and how our finances work.

How You Should Track Expenses

But that’s how I work and it may not be what works best for you.

If you want to sign up for Personal Capital, Mint, or You Need a Budget, go ahead. If automation leads to better results, then that’s what you should do. Just make sure you’re accounting for any expenses you aren’t automatically tracking.

If you’re a fellow spreadsheet nerd, you’re my people. You can find a bunch of good spreadsheet templates to track your expenses online. I could even send you mine, if you want to shoot me an email.

I think setting up your own spreadsheet (with your own reports) will do you more good than using someone else’s template, however. You can customize it any way you want and get it to show the information that’s important to you.

You don’t have to use a computer at all to track your finances. Centsibly Rich has a terrific post on setting up a spending journal on plain old paper.

In other words, do what works for you. But do it. Track your spending down to the penny for just a couple of months and see where your money goes. 

Then you can think about whether your money really goes where you want it to go. Or is some of it going somewhere else instead?

Why You Need to Track Expenses, Even if You’re Doing Okay

That’s the key, folks, That’s why you need to track your expenses even when you know you’re building wealth.

Because if you don’t, some of your money might not be doing what you want it to do. And you’ll need to ask yourself “Am I okay with that?” 

I’m not sure if I’d understood what I was doing, I would have been okay with where my money went. I wasted so much money that I could have saved or redirected. Instead of paying down my mortgage faster, I spent money on impulse buys and the latte factor. (2 Lattes a day at $5 each after tip, times 5. I had a serious coffee issue!) I got the full match on my 401(k), but I could have saved more by being more mindful with my spending.

When you don’t track expenses, you don’t see the embarrassing truths of a $700 a month grocery habit or a $10 ebook a week habit.  And I didn’t see it then because I didn’t understand where my money went. Now I have no excuse for letting mindless spending take away our ability to do the things we’d rather prioritize.

Make the most of your money by really knowing where it goes. If it’s all adding value to your life, great. But if not, tracking expenses gives you the power to achieve your best financial future.

Do you track spending? If not, why not? If so, how do you do it and why? What’s your best advice for those who haven’t tracked expenses before?

*Part of Financially Savvy Saturdays on brokeGIRLrich. *

30 thoughts on “Why You Need to Track Expenses Even If You’re Building Wealth

  1. We JUST started tracking expenses. Never have before (and honestly not sure how it will last!) We’d like some kind of baseline, but we have a ton of changes coming up this year too. It will be far from a “typical” year – with kids both leaving for college, possible moving, etc. We’ll see – but I’m not sure how long it will last 🙂
    Vicki@MakeSmarterDecisions recently posted…Can an Hour on a Jet Ski Help Him Make Smarter Spending Decisions?My Profile

    • Hey, Vicki! I found tracking our expenses very revealing and interesting, so to me, it’s worth keeping up with. But I realize not everyone feels the same, and I think you will learn a lot just from tracking for a couple of months. If you think manual tracking is too inconvenient, you can always switch one of the apps to make it more convenient.

    • Yeah, we know we might miss a few of the cash transactions, but most of them get into our sheet. I do think we need a better system for receipts.

      And one of these days, I’ll need to break down my grocery bill into categories too. I know our spending there isn’t as tight as it should be, but we’ve managed to go from $700 a month or more to an average of $500 last year. Not great for 3 people, but much better, especially since our meals out dropped a lot too.

  2. We track *everything* and we have for two years or more. And we do most of it ourselves. We both have trackers on our phones, and we input, label, and categorize every expense. Then, at the end of the month, I input all those numbers into our Google Sheet budget page. It really, really helps you think hard about where your dollars are going…and why!
    Penny @ She Picks Up Pennies recently posted…Our 2017 Budget: The Opposite of Frugal?My Profile

  3. This! I couldn’t agree with you more. Going by the account balances works on a certain level (as it did for you), but actually tracking the expenses can open your eyes to bigger saving opportunities. Little leaks add up faster than we realize.

    I use Personal Capital, but am very attached to my own tracking spreadsheet. Like you, I like manually inputting the expenses – it forces me to pay more attention. I know I’m a total nerd this way, but I actually look forward to doing it. We collect all receipts in a basket each day and I go through them each week (I also track how much is charged on each credit card – I do this at the same time as the spend tracking spreadsheet).

    I’ve also used the spending journal when we were really trying to get things under control. It gave me better insight on those small cash purchases. Thanks so much for the mention on that.
    Amanda @ centsiblyrich recently posted…How to avoid these common spending triggersMy Profile

    • Little leaks do add up fast, Amanda. That’s a terrific way of putting it.

      I like your approach. It’s much more organized than mine, especially having a central place for receipts.

  4. Love this post! I’ve only been married for 3 months, but my husband has been tracking every single purchase he’s made since college. It’s been eye opening for me! Like you, he does everything on a spreadsheet and keeps it on a flashdrive. Since we got married, he also writes down in a book everything each of us spend from our “Fun Money” we get every month, so that we can just glance at it when needed. Even though we consider our “Fun Money” to be judgement-free (as long as you don’t go over, you don’t need to consult the other person before using it), it’s made me realize that I drink a LOT of coffee. Even though I’ve never gone over my budget and always have money in the bank, I’m working on bringing it from home more. So enlightening!
    Stacy recently posted…Happy New Year! 2017 Goals & UpdatesMy Profile

    • That’s a terrific realization, Stacy. Good luck with making your money work a bit harder. I know for me I felt like I never had enough money for a great vacation when I was single, but if I’d trimmed my coffee habit I could have afforded them better.

  5. I’ve been tracking expenses for the past 10 years or so (my wife was tracking them before she met me), and it’s so cool to be able to look at the expenses, year over year, to see what’s changed. But the real benefit as you said is “so many opportunities to do more with my money”. We carefully track our expenses in Quicken, and then we do a monthly budget report in Excel (Quicken has reports but we’ve customized ours a great deal). At least once a year, but usually more often, we adjust the budget based on changing expenses and changing intentions. Without tracking, we wouldn’t know if we’ve achieved those intentions or not. Our yearly budget gets divided into 12 months equally, so we also keep track of the average expense in each category over the past 12 months. That helps us track our periodic expenses to make sure the average is on or under budget. There’s so much you learn when you start tracking and I would definitely recommend trying it to anyone who isn’t already.
    Gary @ Super Saving Tips recently posted…Financial Security for Women: Closing the Gender Wage Gap #WMWeek17My Profile

  6. Thanks for sharing your thoughts on expense tracking. I’m definitely guilty here and could do a much better job. I don’t pay nearly enough attention to it as I’m almost exclusively focused on the income side of the ledger. But you’ve raised some good points here and I know all my efforts hustling could be compounded even further if I tracked expenses a little more carefully.
    Jay recently posted…Trend Following Stock Trade Ideas For January 2017 (Part 1)My Profile

    • Jay, it’s smart to focus on growing income. I need to do more of that side of the equation, and it is Income-Expenses=Savings. But, just like businesses work on both sides of the ledger and look for ways to cut costs, we should too. It makes your income growth count for more long term.

    • Excellent point! You do need to know what you’ll need in retirement so you can save for it. And while some of your expenses might drop (commuting, business clothes, dry cleaning if you do that sort of thing), you can also estimate what might not (property taxes, medical, travel if you’ve planned well.) It’s good to see where you’re spending money and be able to do some planning.

  7. I am in exactly the same situation as you, Emily. My husband is not comfortable with the idea of “tracking our financial numbers in the cloud” either, and so we use a home-made spreadsheet. My big problem is with my discretionary account. I never used to track it, but I have started – and for it, I use paper and pen, and I place it for all to see on the fridge. The heightened awareness that comes with tracking is worth so much. Like you, I cringe at the thought of all that we wasted when we spent mindlessly.
    Fruclassity (Ruth) recently posted…Community Planking ∥ Personal Finance CommunityMy Profile

    • What a terrific accountability system, Ruth! I know that tracking every little penny embarrassed me with how much I used to spend on stuff that just benefitted me (lunch out, coffee, e-books) and not the whole family, where Jon spent almost nothing on just himself. It got me far more focused that when I did spend money on something like lunch out, it needed to include more family members!

      While it’s an overgeneralization that doesn’t apply to everyone, there are definite generational trends about cloud trust. My dad (Silent) wouldn’t consider it, even though he uses a computer regularly. Jon the Boomer knows about it but doesn’t trust it. I’m an Xer, and I’d probably try it if Jon didn’t object, but I’d probably still think “Is this a good idea?” And my millennial friends don’t think twice about using cloud-based systems.

  8. WE did this for a couple of months last year. Honestly, it told us what we already knew–we spend too much on food, both at home and from restaurants, and if we needed to cut the budget somewhere, this is where we’d start. On the other hand, all that tracking was a royal pain.
    RAnn recently posted…2017 Blogging GoalsMy Profile

    • I’m sorry you didn’t find it useful. It does sound like if for some reason you needed to do it, the apps would be a better approach for you since they would automate much of the process. Best wishes and thanks for chiming in, RAnn.

  9. We are also trying to keep track of our expenses. We were very diligent during our debt-repayment and when we became debt free we kind of went ‘well we’re debt free now!’ and threw money in the air in an exaggerated manner! We are using a book to record our spending this month and I definitely spend more on grocery (little shops here and there) than I should!

    Good luck with tracking your expenses! It really is so interesting!
    Natalya x
    Natalya @ Cottage Retreatist recently posted…My resolution for 2017: give less fucksMy Profile

    • That’s a great image, Natalya, and I can see where once you’d reached a big goal like debt repayment it would be easy to drop some of the habits that got you there (at least for a while.) Congrats on getting there!

      And, depending the rest of your goals and how they are tracking, you can decide whether those extra shops are worth it to you. But I imagine that for someone who posts such delicious looking recipes, those extras are probably put to good use!

  10. the best way to track expenses is to get a tool that helps you to keep track of the expenses. The internet is filled with several tools that will serve the purpose.

    • For some people, those tools work well. Others of us do better with other approaches, and what’s important is to use the approach that works best for you. Thanks for your comment.

  11. We’ve stopped for a few years because it was so time-consuming without much return for our time. Now I’m thinking how we can start again in a way that makes sense for both of us. We use Mint for the big picture and reminders on bill pay but I don’t find it useful for the detail work. I already track our net worth manually, I might just expand that spreadsheet work to track our spending more carefully.
    Revanche @ A Gai Shan Life recently posted…2016: Our year in reviewMy Profile

    • You do have to develop a system that works for you. And I think that even if you only track every now and then (i.e, completely track a couple of months every year or so, not intermittent tracking), you can get a feel for whether your spending patterns are where you want them to be. Good luck figuring out your system, Revanche.

  12. Tracking expenses IS the only sure way to get rich. I know this from first hand experience. I am a long time Forex trader who is extremely interested in earning an income. One of the problems I faced in terms of tracking my expenses was not knowing when to take a break from the Forex world. I often became overwhelmed by the experience and forgot I was dealing with actual money. Thus, I was not really tracking my expenses. Needless to say this led to severe financial losses. This article has been really useful. Thanks!

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