The Odious Task of Tracking Expenses

I come from a long line of habitual expense trackers. Growing up, there was always a legal-sized ledger book in the drawer. A new page was started for each month. Every receipt was entered. There were often a few loose receipts tucked into the book, waiting to be logged.

When my mom passed away and I became the keeper of my grandfather’s papers, they included his ledger from 75 years ago, listing out what he paid for the necessities of life on a small farm.

I’m sure there are still people who consistently track all their expenses every month. But my impression is that most of us don’t. It’s seen as a tedious, burdensome activity. But I’ve also seen the insights gained when people track their expenses for just a couple of weeks.

I remember a class where I gave each person three envelopes. I asked them to write on each envelope a kind of expense that they bought with either cash or a debit card – maybe lunch at work, groceries, gas, coffee, or going out with friends – and how much they thought they would spend on it over the next week. If they were cash expenses, they should “fund” the envelopes with cash, and use that cash when they paid for those items. If they were debit card users, they would collect their receipts in the envelopes and keep track on the envelope of how much they had left to spend.

When they came back the next week, one of the women was really excited. During that week, she had realized how much she was spending on X, that it was lots more than she expected, and that she was probably spending that much every week. Instead of being depressed, she felt empowered by the knowledge and made plans to change those habits. The old saying that knowledge is power came to my mind.

Others came back and said “It didn’t work.” They described situations where they had to spend more than planned. Maybe it was unexpected expenses for the kids at school, or just needing to re-stock the pantry and spending more on groceries than usual. To cover the extra costs, they had taken cash from the other two envelopes. I asked whether they had made any changes in how much they spent in the other areas. "Yes." Seeing how little they had left, they had found ways to reduce those other expenses.

I labeled those experiences a success! Because they knew they overspent in one area, they were able to make adjustments to hold down other expenses. But it all happened because 1) they had a plan for how much they would spend and 2) they were tracking their actual expenses against those plans.

I asked, “If you hadn’t been using the envelopes, would you have changed your spending in the other two categories?” The answer was consistent: "No." Without the envelopes – which were both a budget and a way to track how much they spent – they would simply have spent the extra money on the one item but made no changes in how they spent the rest of the money. Our activity had forced them to see that overspending in one area meant taking money away from another kind of expense. As a result, they looked for ways to cut those expenses.

I don’t expect that most of us will track expenses for our entire lives the way my parents and grandparents did. But doing it once in a while, and maybe just for a few kinds of expenses, can be eye-opening.

It’s especially important when you’ve gone through a life transition. Maybe you got a new job, or retired. Maybe you had a baby, got married or divorced, or your spouse passed away. Maybe you bought your first house, or you downsized to a smaller place. Or maybe you just got your credit card bills after the holidays and are vowing to make some changes.

Keeping track of your expenses for a few months after one of those events means you’ll have a realistic picture of your new spending patterns, and you can spot areas where you need to make a change before you’ve done too much damage.

Tracking expenses may sound odious, but the results can be rewarding.