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This Week’s Money Tip: Tracking expenses is the first step to getting clarity on your money
99% of people know how much they earn, but only 1% of people know how much they spent and saved.
If you want to be one of the 1%, start tracking your expense today.
Here are the reasons why you should track your expenses:
1) Know your monthly expenses
The only way to know how much you spent in a month is by tracking your expenses on a paper or spreadsheet.
When you know your monthly expenses, you can make other important money decisions easily.
2) Estimate how much you can save
Again, most people don’t know how much they spent, hence they have no idea on how much they saved as well.
Savings = Incomes – Expenses
If you know your monthly expenses, then using the formula above, you can estimate how much you saved.
3) Plan for big expenses
When you know your monthly savings, you can start planning for your next big purchases such as a car, a house, a wedding planning, or starting a business.
See how everything links?
This is why tracking expenses is the first step to getting clarity on your money.
Step-by-step Guide to Track Expenses
Okay, I’m done covering the reasons.
Now, how do you start tracking your expense?
Here’s the step-by-step guide you can follow:
1) Analog or Digital
There are 2 ways you can track your expenses:
- Analog: Pen & Notebook
- Digital: App or Spreadsheet
I prefer digital because I can track my expenses anytime as long as my phone is with me.
Personally, I’m using an app called Bluecoin to record my expenses on a daily basis.
I also use a spreadsheet to see my expenses in a bigger picture.
If you’re reading this from your inbox, I believe you already have the access to my free expense tracker spreadsheet. (If not, subscribe to my newsletter to get it)
No worry. You can also choose the pen and book method if it’s your preference.
2) Build the Habit
I’ll recommend tracking your expenses daily, because our human brains are not reliable in remembering things.
I have a daily alarm at 9 pm to remind me to track my expenses. This way I will unlikely miss out on any of my expenses.
You may follow my method to start building the habit. But if it is too strict for you, you can change it to a weekly reminder.
3) Monthly Review
On every first day of the new month, review your expenses on your total monthly expense and each expense category (Food, transport, bills, entertainment)
When you have at least 3 months of expense data, you can start to see your average for monthly expenses and each expense category.
4) Optimize Expenses
When you have enough data, you can identify any expense that can be reduced or eliminated.
This will help to increase your savings.
p/s: Do this in a humanly way so you won’t sacrifice your happiness to save money.
Expense tracking is a journey, not a destination.
Find your own way to track them at your own pace. This habit will not stick if you feel tired doing all these.
Nevertheless, the main purpose of expense tracking is to know how much you can save each month by knowing your number.
At some point, expense tracking becomes optional when you can easily save money.
Personally, I still track my expenses today because I love knowing the exact number of my savings each month.
Just letting you know that expense tracking is very useful when you just started your personal finance journey, but it is not a mandatory thing to do for your whole life.
Talk with you again next week.
Your Money Buddy,
Whenever you’re ready, there are 2 ways I can help you:
1) Book a 1:1 Call Session with me if you want to pick my brain, be it finance or any topic you would like to learn from me.
2) If you’re not sure which platform to invest your money, here are 3 platforms that I personally use:
→ Rakuten Trade – The only brokerage account I’m currently using now to invest in US index funds and Malaysian stocks. Get RM30 worth of RT points if you register & unlock foreign trading with my referral link.
→ Wahed Invest – The robo-advisor I use to invest in Shariah-compliant US Stocks, mainly HLAL ETF. Get free RM10 if you register a new account with my referral code “markeo1”
→ Versa – My favorite place to save my emergency fund which offers 4% return (until June 2023). Get free RM10 if you register a new account with my referral code “AL9JZJ9H”