Importance of Tracking Expenses

If I had to pick the one habit I had that helped me stay out of debt, and maintain control over my finances during my college years, and throughout my working life so far, it would be tracking my expenses.

To give you an idea of how this has helped me, check my net-worth graph from September 2014 to June 2017. During this time, I paid off my house, and maximized both retirement accounts.

Net worth over the years

Understanding my spending patterns also helped me cut down on food waste (among other things). Here is a breakdown of spending on food (groceries and eating out) over the years. Compared to the year 2011, where spent $4938.77 on food, we only spent $2688.83 in 2016! We saved over $2000 on food without compromising on quality of life! To me, this is the very definition of minimalism. Reducing waste, being intentional about spending and maximizing the quality of life in the process.

My own version of the spreadsheet is a little cumbersome, and it is not suited for everyone. Therefore I decided to create a very basic spreadsheet which gives you a platform to begin the process of tracking your expenses. Once you get into the habit, you can customize this as you see fit.You could also use this to create your own spreadsheet in excel, so feel free to make a copy of it and change it to your heart's content. The idea here to be able to look for patterns, and make changes in your life that are advantageous to your goals.

You can view the spreadsheet HERE.

I understand this might be a difficult task for some, but personally it was worth the effort to be meticulous about tracking spending. I also created a video tutorial on how to use it.



If you are a college student, I especially recommend this, because I started doing this in college, and it has helped me immensely when I entered the job market.

Why not use Mint?

This is a reasonable question, I suppose. I personally do not want to give all my information to Mint. I am not comfortable with it.

Filtering data, and getting the information I need is very simple provided I enter the data correctly. If you are someone looking to skip the data entry part, then you have to look elsewhere. This spreadsheet won't help you.

I also found Mint lacking when a single transaction combines multiple categories. As I have shown in the example, a single transaction might contain groceries, computer peripherals, household items etc. Mint does not analyse each item within the purchase (at the time, it might be different now), and it would only show me the overall expense. This was not helpful for me, so I decided to create my own solution.

Conclusion

I strongly suggest you try this for a week. If you feel its too much work, then you could look for a more hands off solution. You are no worse off than before.

Feel free to ask me any questions you might have.