Track Your Expenses

Why you must track your expenses

One of the core and timeless basics of personal finance remains – Earn > Spend. Click To Tweet

Most of us know to the final rupee of the amount that we earn. But how many of us really have an idea of how much do we spend each month? You might ask what is the big deal till the time I am able to just about manage every month with maybe a little pile of savings to account for.

In case of goal setting, one of the most important actions which keeps us focused is undoubtedly tracking. In any sales team, to be able to achieve their targets they know their numbers at the back of their hands because they track them everyday. Ask anyone who has managed a massive weight loss, and they would have tracked their calorie intake considering the equation of burn > consume is very simple. Expense tracking is no different. Even if you do not have concrete financial goals at the moment, just the goal of getting your finances in one place also needs expenses to be tracked.

WHY SHOULD I TRACK MY EXPENSES?

Apart from the macro overall benefit of being able to track your progress towards financial goals, there are some smaller more visible benefits as well like:

  1. Every rupee accountable: It shows a basic respect of your money. Money is hard earned and making a small effort to know exactly where each penny or rupee is being spent lends the whole aspect a level of seriousness it deserves.
  2. Stop spending on things you are not using: There are times when we agree to a regular spending habit and later realize we are not even using the service – Hotstar or Linkedin premium or maybe even the daily newspaper. Those spends will now be more prominent and you might finally make the effort it takes to stop services that you are not using. (Side note: Ever realize how easy brands make it to sign up for a service and the obstacles involved in stopping most of them?)
  3. Little things that add up: While tracking you will come to see that there might be some seemingly small expenses that you make everyday but cumulatively they could be pretty big. This could be a dessert addiction leading to a quick order on Swiggy or the drinking plan every other day.  To me, David Bach puts this concept very well with the “Latte factor” (more on this next Wednesday). You can then decide if those things are important enough to justify the amounts being spent on them.
  4. The power of choice: You and you alone should be able to decide what do you want to spend your money on. In a lot of instances, thanks to peer pressure we end up spending or unknowingly we spend on things which add up to numbers that you might not be very happy about. Seeing it all in one place in front of you will give you the power to choose and decide what you want to spend your money on and what you do not.
  5. No unauthorised payments: There are times when some debits might be made to your account by error. This could be by your bank or any other small expense. If you are consistently tracking your expenses, you would be well aware of such instances and take the right actions for it.

HOW CAN I TRACK MY EXPENSES?

There are multiple ways that you can use to track your expenses. You could try and figure out in good time what works best for you.

Three broad methods of tracking expenses are:

You can track your expenses with a diary, excel spreadsheet or a mobile app
  1. Old-fashioned paper and pen: I have seen my parents have a kharcha (Spends) diary for years with categories made for the fixed spends every month – like milk, groceries etc. While I use this method whenever we are on a long vacation (longer than a weekend), this is something I have not been able to do consistently. However, writing things down sure gives you more time to think and even remember the expenses better
  2. Customised excel spreadsheet: This is another excellent method that a lot of people find handy, especially those who spend majority of their day on a laptop. In fact, excel now has a few templates that you can play around with and make your own.
  3. Expense tracker apps: These are more my cup of tea. Here again there are 2 types of apps – Automatic and Manual. In the automatic app you connect your savings account and credit card account and it pulls in data and feeds it to the app. In India, since all our transactions are sent to us through text message alerts, most Indian apps track expenses by reading those text messages.

I have two concerns with this method – firstly I worry for my data security as personally I am not comfortable sharing such information with a 3rd party app and secondly in India where we make a lot of expenses in cash it might defeat the purpose partly. In come the manual apps where you enter each expense manually. Spend money > Whip out your mobile > Open the app > Enter the expense. Honestly it is just about developing the habit and then this becomes pretty much on autopilot too.

 

WHICH MOBILE APP SHOULD I USE TO TRACK MY EXPENSES?

Personally, I find mobile apps the most convenient option of tracking expenses

Now, this is a trickier ask. I used to use Spendee but somehow I got out of the habit. With this blog in my life I now want to start that discipline yet again. What better day to start it than the start of a month. So, I am going to experiment and put to use 5 apps to track each rupee spent through any payment route (Cash/Credit Card/Digital Wallet) and see how they hold up for a month and report on my experience on 6th December (Wednesday).

Criteria for choosing the apps:

  1. The app should be available in India and track Indian ruppees (INR) or be currency agnostic
  2. Free version of the app should be available
  3. Available on Android and iOS
  4. Allows me to enter expenses manually and not insist on reading my transaction text messages (This ruled out Indian apps 🙁 )
  5. Rated more than 4 on Android (as that is what I am using)
  6. At least 500000 Android downloads

(Drumrolls) The list of the apps is as below:

The 5 expense tracking apps that I am testing for 1 month

I can just hope this post inspires you to track your expenses in a way most suitable to you. If I can track mine in 5 apps for a month (more time than the 21 days it takes to build a habit) you surely can do it too. Do it with me for a month and am sure you will be hooked.

Any questions, opinions or comments, do post it below or email me at aparna@elementummoney.com

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15 Comments

  1. November 1, 2017 at 11:46 am

    Additional Criteria can also be ease in editing the expenses. For example Adding or Deleting Headers or even adding comments. A reminder feature is also a great help.
    Also a lot of free apps while allowing unrestricted use charge or block downloads of the expense sheets. So when you are trying to analyse it and need an excel output you might find yourself shut out.

    1. November 1, 2017 at 6:18 am

      Thanks Anom… I agree on the pointers added by you and will keep those in mind while evaluating my experience with these apps 🙂

  2. November 8, 2017 at 8:12 am

    […] cuppa made by a barista is important to your functioning, by all means spend on it. However, look through your expenses with a scanner and you are bound to find some category which literally makes you gape. There will be an expense […]

  3. December 6, 2017 at 8:39 am

    […] I just completed one of my first experiments thanks to Elementum Money. As promised I filled in my exact spends for a month in 5 chosen manual spend tracking apps for a one… The results are […]

  4. December 11, 2017 at 3:02 pm

    […] my money on? Not yet. If you need more reasons as to why or how you should be tracking your money, read here. Recently, I have taken the first step in this direction by dedicatedly tracking down each rupee […]

  5. January 21, 2018 at 7:33 am

    […] are you making your time count? Are you happy with it or does it all go by in a blur? As they say, if you aren’t aware of it, track it. I did it with my expenses. Be brave and try tracking your time in 15 minute intervals. You will […]

  6. February 7, 2018 at 8:27 am

    […] I like to keep this in a small pocket notebook that I carry as I don’t want to mess up the record on the spending tracker which is in the Indian currency. You can choose either of the 3 ways mentioned earlier to track spends. […]

  7. March 8, 2018 at 2:54 pm

    I can tell you about one unexpected benefit we had from tracking expenses .When my son was 1.5 years old, he started having allergies – not very severe, but we had to go to the doctor every two weeks or so. Went on for months. We couldn’t figure out what was going on until we looked at our expenses and found that we had got a new mattress. Once we got rid of that, his issues disappeared!

    I am leaving too many comments – just going through your blog 🙂

    1. Elementum Money Author
      March 8, 2018 at 3:03 pm

      It can never be too many comments! 🙂

      And thank you for this anecdote. It’s a gem to see the unexpected benefits of tracking expenses which can actually surpass the financial realm too.

      Like you, I have realised noting down my expenses helps me recall the day so much better, too!

      1. March 8, 2018 at 3:05 pm

        I get what you say. Before I started blogging, I wouldn’t leave any comments anywhere. Thought they were like spam. But now, each one makes my heart soar 🙂

      2. Elementum Money Author
        March 8, 2018 at 3:08 pm

        I still find it difficult to leave comments on blog posts with too many comments wondering if it just means I will be lost in the crowd and no one’s going to bother

      3. March 8, 2018 at 3:14 pm

        I sometimes leave comments, and don’t hear anything back. It annoys me slightly especially if that was a question ..

      4. Elementum Money Author
        March 8, 2018 at 3:19 pm

        Oh yes! I know this thread is going long but for months now I have been craving for comments and emails. I have now pledged that how ever many comments or emails I might get, I will always reply to them 🙂

  8. May 16, 2018 at 8:25 am

    […] is a habit that I believe can be very helpful in day-to-day money management. Read here for a detailed view of why tracking spends is important. In this age of data security concerns and for a well-categorized data set, personally, I still […]

  9. July 23, 2018 at 9:25 am

    […] urges us to think in depth about the ways in which we use our life energy for work by consolidating all the money we spend which we wouldn’t if we were not working – this includes the wardrobe for […]

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