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Why is it Important to Keep Track of Your Expenses?

April 21, 2023

Table of Contents

    Table of Contents

      From sticking to a budget to revealing spending issues, here’s why analysing your spending habits is important to excelling financially.

      While how much we earn plays an important role in having a decent lifestyle, how much we save and invest is important to becoming wealthy. In order to maximise your savings, it is important to keep track of your expenses.

      Our income is not a key determinant of our wealth, but our assets and investments are. The gap between the income we earn and the amount we save and invest is what we call "spending," i.e., how much we spend.

      Thus, it can be said that we need to keep our spending in check to bridge this gap as much as possible and take active steps to financial success.

      But what is the use of analysing our spending habits, and how can we do so? Let’s find out!

      Why Should We Analyse Our Spending Habits?

      Following are some of the prominent reasons why we should start focusing on analysing our spending habits to become financially successful:

      To stick to our budget

      Each one of us creates a budget. While we always try to stick to it, we are rarely able to do so. One of the foremost reasons is that we are often unaware of our expenses.

      Once we receive our income, we get so involved in a spending spree that we only end up with a minimal bank balance at the end of the month. Thus, analysing our spending habits is a great way to stick to our budget.

      It helps us know where we are utilising most of our income and enables successful money management.

      To reveal spending issues

      Many times, we don’t even realise that we are trapped in a spending habit. For instance, it could be our habit to buy the latest model of the iPhone just because we love it! 

      Another example could be to always eat that burger on our way to the office. Apart from spending habits, we might also be paying for certain services that we are not utilising in the first place.

      For instance, we might have taken out a gym subscription that we are not using. Or the subscription for different entertainment platforms. 

      We need to determine what services we need and are actually using. It helps us determine which parts of our expenses are necessary and which are unnecessary.

      Even small recurring monthly expenditures, like an OTT platform, can add up significantly to your yearly budget. 

      Simply cutting down on our unnecessary expenses to save and invest more is one of the keys to financial success.

      To meet financial objectives

      Another important reason why we must analyse our spending habits is to meet our financial objectives.

      That new car, that new home, retirement planning, etc.,—we all set financial goals in our lives. 

      But often, we pay little attention to the important steps and the process to achieve those goals.

      Analysing our spending habits will tell us whether we are on the right track to achieving our financial objectives and where we stand. 

      This helps us make necessary changes and get back on track. Further, if we are way ahead of the game, we could just upgrade our financial objectives for becoming financially successful.

      How Do We Analyse Our Spending Habits?

      So, the importance of analysing our spending habits is pretty clear, and it is one of the most effective strategies for financial success

      But, how can we analyse our spending habits? 

      It might seem easier said than done. But it isn’t that difficult. Following are some of the most effective ways to analyse our spending habits:

      Bifurcate your expenses into needs and wants

      We need to bifurcate our expenses into needs and wants. Needs are the necessary stuff that cannot be compromised, while wants are our desires.

      For instance, grocery shopping is a need, whereas an OTT subscription is a want. Once we bifurcate our expenses into needs and wants, we can proceed with the next step, i.e., budgeting.

      Create a budget

      This is one of the most important steps to analysing our spending habits and creating a successful financial plan. We need to create a budget and strive to stick to it. 

      Creating a budget will enable us to bifurcate our expenses under different headings and allocate a portion of our income to each expense head.

      Adopt 50/30/20 rule

      If we find it difficult to create a budget, we can simply use the 50/30/20 financial rule.

      As per this rule, we should allocate 50% of our income to our needs, 30% of our income to our wants and desires, and 20% of our income to savings and investments.

      The 50/30/20 rule has been effective for successful money management for decades.

      Spend through online or banking channels

      If we use cash for our daily expenses, managing and tracking expenses can become difficult.

      Therefore, we should use online banking channels for most of our expenses. This is because we can access our bank statements anytime and always track where we have spent our income.

      Track periodically and make necessary adjustments

      This is the last step to analysing our spending habits. We should periodically track our expenses each month and make necessary adjustments to stick to our budget. Soon we'll be walking on the path to achieving financial success and freedom.

      In a Nutshell

      Analysing our spending habits can help us make informed financial decisions, which ultimately will lead to financial success and prosperity.

      As per The New Indian Express, 80% of Indian employees run out of salary before the month ends.


      What’s more astonishing is that 34% of employees run out of money in the middle of the month. What could more clearly highlight the importance of tracking spending habits than these horrendous figures?

      Jar App is enabling people to automate their savings and investments. It allows us to invest in digital gold through the daily savings app.

      Gold has been a part of the investment portfolio of millennials of all ages. It is a great hedge against inflation and is relatively more stable than other investment avenues like stock markets etc.

      We can start investing with as little as Rs. 10. Further, automating the investments helps us prioritise investments before spending, which is important if we want to excel financially. It’s time to automate your success with money by using the Jar app!