Here’s Why You Should Start Tracking Your Finances

By Wild Ginger

January 25th, 2021 at 3:36 am

We entered 2021 hopeful, but cautious. Hopeful because there’s a vaccine on the way, and things were slowly starting to feel normal again. Cautious because if there’s anything we learned from last year (other than just how important mental health and hygiene are), it’s to always expect the unexpected.

We were given less than two weeks to revel in the glow of a new year before going back into lockdown. Businesses were barely surviving, unemployment rates were rising, and mentally, everyone was trying to “hang in there”. Now here we are, two weeks later and a week closer to another month. As relieving as pay day is, it has recently left some of us wondering if it may be our last, or the beginning of pay cuts.

If you haven’t already, it’s time to start keeping track of your finances, and prepare for any uncertainties. Taking charge of your expenses can seem intimidating at first, but it will allow you to adjust your spending habits for reduced incomes, and plan out your savings in case of an emergency. Here’s how you can start tracking your finances to cope with the current climate:

Organize your finances

First and foremost, you’ve got to face the ugly truth. Gah! Head to your bank account and download your most recent bank statements. Start by separating your expenses into two categories: Fixed Costs (Needs) and Variable Costs (Wants). Your fixed costs are essential recurring costs, such as rent, car loans, phone bills, groceries – these are all necessities. Variable costs are those you can do without, like eating out, buying clothes, subscriptions and memberships.

Develop a budget

Now that you know how much your fixed expenses are, you can calculate how much you’re able to save, and spend on variable expenses. Divide the spendable amount by weeks, or days, to give you a better understanding of how much to spend. We recently found out that a majority of our followers don’t have a budget because they don’t believe they have enough money – it’s not about having excess cash, it’s about tracking your finances and making sure you spend within your means. You can learn more about budgeting from HeyAlfred, a personal finance app, here.

Create a table

Get into the habit of tracking your finances daily – it makes it easier for you to remember what you’ve spent on. A spreadsheet will allow you to see how much money you have left to spend, and help you decide which variable costs to reduce or eliminate. You can follow our example below: