Keeping track of your expenses is like a journal for your finances. Good journals serve two purposes:
- Reflect on the past, and learn from it
- Anticipate the future, and prepare for it
By building the habit of expense tracking you become more conscious and mindful about our finances, which will naturally lead to more conscious decisions and results as well.
Reflecting on the past
Reflecting on the past helps you to evaluate your own behaviour and to come up with new strategies for improvement.
Asking questions like
- What did I spend too much on?
- What impulse purchases did I have?
- Do I really spend my money on things that represent my values?
become incredibly easy to answer. Plus, making a habit of monitoring your expenses these questions will arise automatically, without even thinking about them. Answering these questions will help you achieve your financial goals, whether it is be truthful to your core values or to increase your savings.
Anticipating the future
When you have a retrospective overview about your financial habits, patterns will arise. You will learn and memorize, how much you tend to spend on various things - without doing the math in your head. You can use this knowledge to project your financial pathway into the future. Ask yourself:
- Following this system, where will I end up 6 months from now?
- Is time working for me or against me?
- How can I tweak my budget to match my financial goals?
Using the learnings from your previous Budgets you can create a new Budget that serves your financial goals and purpose even more. Tweaking every Budget penny-by-penny, you can steadily approach a personal economy, that represents your core values as much as possible while maximizing your savings at the same time.
If you wish to learn more about how to budget efficiently, check out these Prefund Docs as well: