Everyone wants to know the secret to financial freedom. You can’t get through a single day without seeing something on the news or social media about it. On this episode of GMR, we’ll introduce you to the one thing, the Financial Superpower that will get you there. And guess what? Anyone can do it!
In this episode we’re going to talk about a huge foundational piece of finances, something that often gets overlooked, but it’s absolutely vital to long-term financial success. We’re going to talk about Tracking Expenses consistently. Tracking changes behaviors. It’s like a superpower that starts to give you control back over your spending. You will feel empowered and enriched because you’ll have real time info and will be able to stick to your true financial goals.
We all have things we want to accomplish.
Getting completely out of debt.
Having an emergency fund so you don’t feel financial pressure at the same time as the emotional pressure of an unexpected event (stability fund).
Saving for a down payment on a home or moving to a neighborhood you love.
Setting aside money for your kids to go to college one day.
Saving for retirement, making sure your family is taken care of when you’re no longer able to work full-time.
Here at Getting Money Right we always emphasize creating margin in your finances so you can be free to pursue your true life’s purpose.
Tracking Expenses is the first step to doing all of these things
Fortune 500 companies tracks their expenses.
They know that tracking spending is vital to the health of the company.
Because they have good tracking in place, they are able to make important decisions that will affect the entire company, every single employee.
You have the opportunity to track your expenses and make better financial decisions based on the data, which affect the entire family, even future generations can be impacted by this one single component of finances.
Tracking expenses is the one thing that will help you the most in becoming better at managing your money.
Why people don’t track
Most people don’t even know they should be tracking (ignorance)... were never taught how.
Too busy - leads to more spending.
Working extra to get ahead creates an out of balance lifestyle which almost always results in spending more (impulsively).
They don’t accept their financial situation because they see it as sub-standard (not enough $). Tracking reminds them they are not where they wish to be so they avoid it.
They have an unhealthy view of who they are and believe spending money provides them a better version of themselves.
People think they can handle all the tracking and budgeting in their heads. If you ask them about math, they will say “I’m terrible at math”, yet they try to handle all of their finances in their head.
Many people have some kind of budget. Sometimes it’s a spreadsheet and sometimes it’s a spiral notebook; they have some kind of system. So the problem for them is not the plan, it’s a lack of tracking income and expenses through that plan.
Having a budget is a good first step, but without consistently managing the budget, which you do through tracking every expense, you will not realize the full benefits of what the budget is designed to do.
How the budget helps us make the right decisions and fulfill our financial goals
Tells us how much we can spend in each category each month.
Shows us how much we’ve spent at any given point during the month.
Provides us with the balance of what we have remaining in each category throughout the month.
These three factors help us in making the best financial decisions that will keep us on track and able to meet our goals both long and short term. If your budget doesn’t include these three you don’t have all the information necessary to make good financial decisions.
There is no independent financial decision. When you spend money in one area you will have less money to spend on other expenses.
Cost of not tracking and managing your budget
Not reaching your financial or life goals
Almost impossible to adjust and make it when financial challenges come
Overtime runs out.
You get laid off.
Reduction in hours; cut in benefits; rise in medical premiums.
Saving for, vacations, cars for cash, college, retirement
Never going beyond good - you budget and stay below your income, (just below your income) but never truly accomplish financial independence.