The Importance of Monitoring Spending Habits

Have you ever thought about your spending habits? Are you a thrifty shopper, always looking for the best deal? Are you a window shopper who just likes to look and rarely buys? Or, are you an impulse shopper, immediately falling in love with anything you discover hanging on the clothing rack or waiting for a buyer on the store shelf? 

Regardless of the type of buyer that you are, monitoring spending is a must. Even the smallest purchases here and there can really add up. Think about it—even those coffees from your favorite coffee shop can easily add up before you know it. And perhaps worse, careless spending habits can negatively impact applying for loans. 

In this article, the Cash Store team will share thoughts on how you can better monitor your spending habits.

Understanding Spending Habits 

Unfortunately, the things we need to live our lives don’t come for free. Even if we live off the grid and grow our own food, expenses are going to creep up from time to time. And for most of us, we spend money every day—$199.91 per day, to be precise. If you’re like we were when we read this statistic, your eyebrows probably went up a notch or two. But it’s true. We spend money daily on housing, transportation, healthcare, clothing, groceries, and more. And it really adds up. 

Understanding the different types of spending is a must for maintaining a healthy financial balance. Essential spending includes costs necessary for daily living, such as rent or mortgage, utilities, groceries, transportation, and healthcare. These expenses cannot be avoided and must be prioritized in any budget.

On the other hand, non-essential spending covers expenses that are not necessary for everyday survival. These include dining out, entertainment, luxury items, and other discretionary purchases. While these expenses add joy and variety to life, they are the areas where it’s easiest to cut back if needed.

To help you steer clear of common financial mistakes, here’s a list of spending traps to watch out for:

• Impulse Buying: Making unplanned purchases can quickly derail your budget. Try to pause and think before buying anything on a whim.
• Subscription Services: Monthly subscriptions, even small ones, can add up. Review your subscriptions regularly and cancel those you no longer use.
• Lifestyle Inflation: Increasing your spending as your income grows can limit your ability to save. Maintain a modest lifestyle and focus on saving and investing income increases.
• Social Spending: Going out with friends can lead to excessive spending. Set a budget for social activities and stick to it.
• High-Interest Debt: High-interest credit cards for non-essential purchases can lead to significant debt. Try to use cash or debit for daily expenses to avoid accruing interest.

Benefits of Monitoring Your Spending Habits

As you can see from what we shared above, your spending can quickly get out of control. Not only that, but things like inflation can cause us to spend more than before, even when we didn’t do anything to change our habits. That’s why the following tips are so important.

• Financial Awareness: The first step towards financial control is to gain a clear picture of where your money goes. Try writing down everything you spend money on for a week. And, create a financial vision board to help you identify your long-term goals. This exercise can help you see patterns and identify areas where you might be spending more than you realize.
• Budgeting: Creating and sticking to a budget is essential for financial health. Consider using the 50/20/30 budgeting plan, which allocates 50% of your income to necessities, 20% to savings, and 30% to wants. This method can help you manage your finances more effectively and ensure that you're not overspending in any one area.
• Identifying Problem Areas: After tracking your weekly spending, review the list and categorize each expense as essential or non-essential. This will help you identify unnecessary expenses and habitual overspending. By recognizing these patterns, you can make informed decisions to adjust your spending behaviors.
• Saving and Investing: Redirecting funds towards savings and investments can significantly impact your financial future. Review your emergency fund to ensure it covers at least three to six months of expenses. Also, check on your retirement savings progress. Adjusting your savings goals can help you stay on track and prepare for the future.

Methods & Software for Tracking Your Spending 

In today’s digitally savvy world, we have evolved from using a notebook and pen to track our expenses. Whether you use a simple spreadsheet or a budgeting app, tracking what we spend is easier than ever. That said, it is important to try different options to see what works best for you. Here are the most common ways that people today manage their finances.

Manual Tracking 

For those who prefer the tactile and visual aspects of manual recording, notebooks, spreadsheets, or journals can effectively manage finances. If you find comfort and clarity in the "old school" method and it works well for you, there's no reason to change. This approach allows for personal customization and can be a very hands-on way to feel connected to your spending habits.

Digital Tools 

Numerous budgeting apps and financial software make tracking spending straightforward and convenient. Popular options include (but are not limited to) the following:

• Mint: Mint provides a comprehensive overview of your finances,from budgeting to tracking expenses, and offers personalized insights. 
• PocketGuard: Known for its simplicity, PocketGuard helps you stay on top of your spending by showing how much money you have left for the day, week, or month. 
• Honeydue: Excellent for couples, Honeydue allows partners to manage their finances together, track budgets, and discuss spending habits. 

Using these digital tools can automate much of the budgeting process, making it easier to keep an accurate and up-to-date record of your finances.

Automated Alerts

Setting up automated alerts through your bank or budgeting app can act as an additional layer of financial oversight. You can configure notifications for when you approach spending thresholds or detect unusual activity. These alerts can help you stay aware of your spending in real time and adjust your habits promptly if you're deviating from your budget.

Long-Term Impacts of Monitoring Your Spending 

Tracking everything you spend might feel overwhelming. But the fact is, doing so will pay off in the long run. Consider these long-term benefits that will make the process well worth it. 

• Debt Management: Monitoring your spending helps reduce and avoid debt by ensuring you live within your means. It allows you to strategize your payments and avoid unnecessary financial burdens.
• Improving Credit Score: Regular expense tracking leads to timely bill payments and reduced credit utilization, which are key factors in improving credit scores.
• Building Emergency Funds: By monitoring your spending, you can allocate more to an emergency fund, ensuring you're prepared for unexpected expenses without resorting to high-interest credit.
• Achieving Financial Goals: Systematic spending tracking aids in saving for long-term goals such as home purchases, dream vacations, or a comfortable retirement, making big financial aspirations more attainable.

Monitoring Spending is Not a One-and-Done Exercise 

Monitoring spending and maximizing your finances is an ongoing strategy. But, once you get a system that works for you and learn to live and spend within your means, it doesn’t need to be a difficult path. And, if you need access to fast funds to help bridge a gap, Cash Store is here to help. We offer a variety of loan options. Complete our prequalification application to get started.

The content on this page provides general consumer information or tips. It is not financial advice or guidance. Each person’s circumstances are unique. The Cash Store may update this information periodically. This information may also include links or references to third-party resources or content. We do not endorse the third-party or guarantee the accuracy of this third-party information. There may be other resources that also serve your needs.