Track your spending. Or not.


One of the most universal bits of advice from financial planners is to track your spending.  It's also one of the most universally rejected bits of financial advice--rejected by people who find it tedious and fiddly.  In the interests of making everybody happy, I'm going to come down squarely on both sides of this issue.

Anybody who's actually developed the habit of tracking their spending will assure you that it takes virtually no time at all.  So, I think the reason that people object to it is not really that it's tedious or fiddly.  The real reason that they object is that they're not the sort of person who needs to worry about every penny.

And, of course, they're right.  Although the pennies do add up, nobody makes or breaks their finances with the little indulgences here and there, whether they're $5 microbrews at the bar or splurging on the name-brand facial tissues.  What breaks your finances is usually either a huge, unavoidable expense (the uninsured loss of something you simply have to replace, medical bills, a lawsuit) or else a sharp drop in income in the face of fixed expenses that had previously been manageable.

Neither of those situations is really helped much by tracking your spending.  You know what your major fixed expenses are, and you know what your huge unavoidable expenses are.  What's to track?

Given that, why does every financial book suggest tracking your expenses?  

There's gold in your small expenses

They aren't the expenses that break your finances, but they are the expenses that make it hard to accumulate capital, which is a key step toward the security and independence that your financial planners want for you.

I'll spare you yet another overhyped example of how much money you'd have if you saved an extra $7 or $70 a week and let the interest compound, except to note that if the timeframe is the rest of your life, it amounts to quite a bit of money.

This is really the less important reason, though.

You have no idea what you spend your money on

Even if you've tracked your spending in the past--but especially if you haven't--you actually have no idea how much money you spend on that second tier of stuff, after your ten or twelve biggest expenses.  And if you knew, you'd spend that money differently.

That's the reason that all the experts want you to track your spending.  I can guarantee you that, if you actually go through the exercise, you'll discover that there are things that you spend way more money on than you realize.  Maybe it's nights out with the boys, maybe it's sodas bought out of the machine at work, maybe it's nice clothes from the department store.  I don't know--and neither do you.  That's why everybody suggests that you track your expenses.

More fundamentally, though, your spending doesn't match your true values.

If you're already tracking your spending, you've no doubt already discovered this.

If you're not tracking your spending, each small extravagance stands alone as something that gives you pleasure that's worth the price.  It's only when you start keeping track and aggregating those small extravagances that you see that they don't really stand alone--each one stands in relation to all the others.  One soda from the machine is no big deal.  A soda from the machine every day begins to add up.  But it's not the dollar total that really matters, it's the things you didn't buy, that could have been bought with that money--things that might have made you happier than the things that you did buy.

So, track your spending.  Or not.  But understand that the question is not whether you're the sort of person who needs to worry about every penny.  The question is, are you the sort of person whose spending aligns closely with your true values?  Or, are you the sort of person who doesn't know whether your spending aligns with your values or not?

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Guest's picture

Unnecessary spending may cause you to avoid necessary commodities that you really need.

Guest's picture

Very well put. If you have never tracked your spending, you really need to do it at least once. I thought I knew where all my money was going, but I was quite surprised when I finally tracked all of it.

Honestly, not tracking your spending seems rather foolish. Can you expect to run a successful business without knowing where your money goes? Why would your own spending be any different?

Guest's picture

I track my expenses now and again, I can't seem to do it on regular basis though.

The one thing I always see when I do this is less spending on my part. Having to write down what you spend makes you less likely to spend in the first place, I think that is the big take away from tracking your spending.

Guest's picture

I hate tracking where my money goes, but when I started doing this in January 08, we realized something akin to a 15% increase in household salary. Our income didn't really increase, but we got choosier about where we spent our money. In May, I had major surgery and NONE of it went on credit! We saved up the money before we needed it--a new concept for us and one we will not stray from again. We will be debt free in 3 years.

Guest's picture

I agree tracking your spending will give you a great picture of your values. If you are lazy like me and don't want to keep your track of your receipts and pay everything by debit or credit card I would suggest using it is a great site that combines all of you transactions so you can have complete picture.

Guest's picture

I'll speak up against expense tracking, although I do it (for my sins). It does take a fair amount of time; five minutes a day adds up to a whole day to catch up on crap over the course of a year. And I have never noticed any benefit -- never caught any fraud, never noticed any patterns I wanted to change, never cut my spending. Most persuasively (to me), the money-savviest people I know say it's a waste of time.

I suspect that it's a good short-term exercise for people who don't know where their money is going. For those who do, it's just a bad habit, and one I wish I could break.

There, I've said it.

Guest's picture

I started tracking my grocery spending at the beginning of May because I knew that was the last area of my budget that was sort of a mess - my budget said I had X # of dollars to spend each month on groceries but I was pretty sure I was over spending...OK I was in denial as to how bad it was but I knew something was off because I wasn't really getting ahead financially and I new the answer was in this category.

I have been tracking every grocery expenditure (this includes non-food items purchased in a grocery store or Costco) for three months now and it has been extremely easy (I thought it would be such a pain). I just save the receipts I get from everywhere and every week or so I pull out the receipts and key in the data on an Excel spreadsheet. I track what I bought (ie. bread, milk), where and when I bought it as well as leaving myself notes (ie. excellent sale, buy-one-get-one, etc) so that I can determine which items go on sale when with the hope that in the future I can buy enough of these items on sale to last until the next sale.

What I have learned is that I was spending WAY more on food than I budgeted for (some times double my budget). When I analysed my spending after two months, I was able to figure out where I was going off the rails (ie. too much junk food). Now I just avoid these sections of the store or reduce how much I has only been 23 days since I took the time to really analyse my spending but I've been on track ever since then and haven't felt the least bit deprived.

For me, the tracking has just given me clarity on an area that needed cleaning up and the real reason I hadn't done it earlier was because I didn't want to change my behaviour. Now that this area is under control I have started making double car payments so should be able to pay my car off this year instead of next. Not bad for a little bit of time spent tracking...and my waist line should benefit as well!

Philip Brewer's picture


I guess I'm not surprised to hear that there are some people out there who can do this intuitively, just like there are people who can buy a new refrigerator without measuring it and have it fit right in the space in the kitchen.

I'm also not too surprised to hear that someone who had always tracked her expenses finding that the result of the tracking hadn't produced any change in behavior.  But in that case I'd be inclined to give the tracking some of the credit--if you've been tracking expenses right from the start, then you've always known what you were spending, so you never had a chance for incomplete knowledge to turn into bad habits.

Guest's picture

I tracked my spending for about a year when money was tight. However, it didn't cause me to spend my money any differently; it was more out of curiousity. Then it got to be a bore, and that was 30+ years ago. I'm fairly well off, because I spend so little anyway. I can easily track it in my head.

Guest's picture

I don't write down expenditures--never have. For my purposes, a ballpark figure is good enough, and the mental math keeps my brain sharp.

Guest's picture

I've always just written down some spare cash in my pocket as "petty cash" rather then counting what I buy. That way when I go to order a fancy lunch I can look at my wallet physically and say ok I have this much left. Is it enough to stretch until next time i fill this wallet? Can I splurge now and fast later. That helps me a lot. When grocery shopping and such comes around, I bring with me cash as to prevent me from over shopping. I keep it in another pocket in my wallet as to not get them confused. The best part is when I get my next paycheck I simply "fill up" my wallet to it's spending limit. The rest stays in my bank.

That might help those who don't wish to count each and every receipt. Counting and measuring constantly always makes me super conscious to the point where I don't buy things that I need. I make due. And that feeling is what you want to avoid with a budget because then you just say forget this i'm going to buy, and that ruins the budget.

Guest's picture
Debbie M

Good point. Periodically I get the feeling I don't know where my money is going and I start tracking it again. Last time I learned that my problem was that I wasn't collecting debts (e.g., my roommate's half of the expenses) in a very timely manner.

And like orangetiki, there are some things such as car costs that I always track for various reasons. Keeping a running average of how much it is costing to own a car led me to increase my budgeting for that item fairly recently (even though I'd been ticking it up to keep up with inflation, but my new car just costs more to keep up than my last car did, so now I know). And I will periodically focus on a specific area, like food, if I'm wondering about that.

Guest's picture

Coming down on both sides of the issue was smart, as you can easily see from the comments above that this can both ways.

My wife and I have been married 5+ years and have tracked our spending (every penny) for 5+ years. It has helped us maintain awareness, been EXTREMELY helpful in communication with each other, and has stacked the odds in our favor that what we're spending is in line with what we truly value.

That being said, I've noticed an interest trend over these years. We now actually update our budget only once a week. We don't write things down by hand, we import the bank's files (we spend very, very little cash) so the exercise is really one of categorizing. The takeaway on it I suppose is that as our habit has become more ingrained, we've been able to do it less and less, while still deriving significant benefit from it.

For those struggling to make ends meet, it's a must. For those that have significant padding, taking a higher-view approach is fine. With people I've coached (granted, that population is struggling, by definition, almost always) the tracking of spending has probably been the biggest eye-opener of the whole process.

Guest's picture

I don't track expenses all the time, just in some periods, it's been a big eye-opener anyway.

This year I started tracking my clothing shopping, my weakness. So I can now say if I've bought too many unnecessary items / items I don't wear / etc

Guest's picture

I think many people confuse tracking their spending with budgeting. While you have to track your spending to know if you are staying within a budget, you don't have to budget in order to track spending. I think many people are turned off by budgeting. I track out spending, but do not set a budget. Besides wanting to know where our money is going and being able to compare expenses from month to month, it allows me to know what our bottom-line balance is, which keeps us from spending more money than we have. Spending less than you make is the most important step in getting your finances under control!

Guest's picture

I love your closing remark "whether your spending aligns with your true values" That's such a more compelling reason for me to track my spending than worring where every cent goes. Thanks for the fresh perspective on the issue!

Guest's picture

I take out a fixed amount of cash per paycheck for whatever and don't really pay attention to it at all. However, I get to use the holy grail of banks USAA and am addicted to checking all of the rest of my accounts religiously, almost every day, so I guess I do track my spending in a way. (That and I am anal about checking for fraud, I work in the industry.)

Guest's picture

Its important to track your spending cause if you dont you will end up over spending and being later on payments leading to bad credit or worse having to file bankruptcy.

I found this great site that has all the tools to track your spending and best of all its free.

So for all your Finance and Money needs and help do see us.

Guest's picture

I don't bother writing anything down. I use the good old envelope system. On payday I withdraw my "allowance" for 2 weeks. The rest of my pay stays in the bank to cover rent, car insurance and phone/internet bills.

Envelope 1 = disposable income (DI) week # 1 (I get paid every 2 weeks) Envelope 2 = week #2 DI. Envelope 3 = groceries. The rule for DI, is anything I want. I buy my gas for the 2 weeks on payday as the bank machine is at the gas station.

Also another way to keep the DI in check, don't bring money to work. I never feel guilty about purchases with my DI because that's what it's there for - purchases. Of course I seldom waste my precious DI on restaurant dinners, booze in bars or general crap. I like the visual side of the envelopes because I can see the pile of $20 bills decreasing as I spend. For me this is a better way to curb spending than writing down stuff.

Guest's picture

I think the largest real benefit of tracking your spending and using a budget is that it provides you the income and expense data that lets you more accurately and project forward into the future the consequences of your current money patterns.

In an age of credit cards, where (up to now) it is possible to outspend your income for a considerable period of time before being brought up short, that kind of information is practically necessary if you are going to maximize the utility of your money. In the "olden days" you could just monitor your bank balances. Now I feel that I need the spending data and budget to to maximize the effectiveness of my earnings. And it's simple enough to do that it seems silly to go without the data.

Guest's picture

I don't always track my expenses, but when I do, it's always (The Greatest Man in the World quote, intended).

It's easy to just automate your bills, use debit card instead of cash, and simply log into to see where you're spending. They allow you to setup budgets as well.

Guest's picture

Man, you nailed it right on the head. Tracking your spending isn't about being finicky or following a strict budget. It's more about understanding what you spend money on so that you can adjust over time to funnel your money into things that align with your values (i.e. that give you the most pleasure). I've been tracking my spending for over a year now and have dramatically improved my financial life. Not only have I reduced my stress level from juggling money from paycheck to paycheck, I've paid off a high interest credit card, managed to save a few thousand dollars, and generally have made myself happier because I can spend money on things that bring me the most joy.