“Don’t save what is left after spending. Spend what is left after saving” – Warren Buffett
If you are someone who wonders at the end of the month; where did all the money go? You need to start tracking your expenses ASAP!
Why is it even important to track your spendings?
It helps you become aware of your own spending habits. Today, with so many transactions happening digitally, we swipe our credit cards or shop digitally or use e-wallets in a snap. It has been proven that if you spend money using hard cash, you may end up not spending as much as you would digitally. The actual feeling of parting with your money physically makes you think twice!
This is how tracking my expenses made me rich! (Not literally)
Tracking helps you identify exactly where you are overspending.
A few years ago, I noticed my biggest expenditure every month after travelling (which was something I couldn’t cut down upon) was spending on outside food, especially weekend outings with friends. If you live in Mumbai, you’d know what I’m talking about. The purpose of those outings was to catch up with friends and unwind a bit. That could be done at a much lower cost and different venues too. Without compromising my outings, I still managed to save an easy Rs. 4,000 monthly i.e. Rs. 48,000 annually. This extra saving in my hand invested at 15% compounding annually stands at Rs. 1,43,762 in just three years! Isn’t that amazing?
The “How to” Guide
Step 1: Get an Expense Manager App for tracking your cash expenses
Step 2: After you have made an expense, immediately record it in the app or at the end of the day.
Step 3: Don’t use e-wallets as the multiple transactions don’t get reflected on your bank statement. Spend digitally directly using your debit card or credit card.
Step 4: At the end of the month, export your expense report from your App along with your bank statements.
Step 5: Analyse your spending pattern. Cut down wherever you can. Exercise discipline in areas you are overspending.
Step 6: Invest the saved money every month in an investment vehicle giving at least 12% return per annum.
Step 7: Get rich!