Spending less than you earn is a cornerstone of a sound financial life. There can be no investing, and consequently no sipping cocktails on tropical beaches, if you don’t have any spare cash to invest. I believe budgeting is a core skill that will help you spend less than you earn and allow you to save and invest for the life you want.

 

Budgeting vs Expense tracking

Budgeting is planning in advance what you are going to spend on certain categories per month or per year (ie next year I will spend $1000 on coffee). It is a hope, a guideline, a goal. But it is not reality unless you actually track and make sure you are sticking to your budget.

Expense tracking gives you insight into what you are already spending your hard earned cash on. If you find yourself asking “where does it all go” or living paycheque to paycheque, this is especially for you. It is backward looking, and it brings all your “little” expenses out into the cold light of day. To track expenses properly, you have to account for ALL of your spending, including cash and especially including coffee, beer and all the other “little” luxuries.

 

Expense tracking comes first

It’s very hard to create a budget if you don’t know what you’re spending your money on currently. Expense tracking will help you understand “where it all goes” and from there you can create a budget that takes into account your current spending habits and patterns, with some adjustments as you see fit.

 

Read on to find out more about how you should go about tracking expenses.

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