Road to good financial health: Effective ways to help you start tracking your expenses
Sound management of your finances can allow you to both achieve your financial goals and build resilience against economic uncertainty. Understanding strategies that can help you effectively manage your finances is a key component of your financial well-being.
This blog series outlines strategies to help you get started on the road to good financial health. For our last post in this series, we explain the importance of tracking your expenses and outline some ways you can get started.
Why should I track my expenses?
Keeping an eye on your expenses gives you a good understanding of where your money is going, which you can use to manage your finances better. When you can see where your money is regularly going, you can adjust your spending to keep you on course to achieving your financial goals.
In fact, the Financial Consumer Agency of Canada (FCAC) says that even small changes to spending habits “can have a major impact on your budget and your ability to save.” Below, we look at some helpful ways to help you begin tracking your expenses.
1. Review your account statements.
Going over your banking and credit card account statements over the last couple of months can help you identify any patterns or trends in your spending. Reviewing your statements will also allow you to see which expenses are fixed (which the FCAC says are costs that come up every month and are roughly the same each month, like mortgage payments) and which are variable (costs that “vary from month to month,” like food, entertainment and travel).
2. Categorize your expenses.
After you’ve gone over your expenses from the last few months, it’s helpful to start categorizing each expense as a need or a want. We go over the difference between needs and wants in the previous blog in this series, and it’s good practice to familiarize yourself with the two expense categories.
3. Build a budget.
Once you have a good grasp of your expenses, you can start building a budget to help you manage your money toward achieving your financial goals. One popular budget you can use is the 50/30/20 rule, which divides your after-tax income into three categories: 50% for needs, 30% for wants and 20% for savings or debt repayment.
4. Keep a record of your daily purchases.
Whether you use a spreadsheet app or prefer to use a good ol’ notebook, keeping a regular record of your daily purchases is a good practice that can help keep you accountable to your budget. Then at the end of every month, you can compare how much you’ve spent with the budget you have planned and adjust as needed.
5. Make it a habit.
With careful planning and a little discipline, you can make regularly tracking your expenses a good habit that can go a long way to helping you reach your financial goals.
Good financial health starts with sound strategies such as tracking your spending, building a budget and growing your savings. And combining these strategies with a good cash back credit card can help you get more out of your everyday spending by making your money work harder for you.
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