Track your spending
Know exactly where your money goes
5 minutes
Knowing where your hard-earned money goes is the first step towards taking control of your finances.
Little things add up more quickly than you realize – those MVR 5/- snacks at the Gaadiyaa may not seem much at the time, but by the end of the month, it may be taking up more of space in your wallet than initially thought.
But let’s get this out of the way – we’re not implying that you should deny yourself the simple things in life. Rather, being aware of your spending habits will allow you to make more informed decisions and spend better. What’s more, it will help you save for the future.
Ideally, you should record your expenses every day.
It may be difficult for someone who has never done this before, but thankfully there are many ways of helping you along.
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Ways to track your spending
1. Bank Applications & Bank Statements
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Most mobile applications offered by local Banks will have the option to view the history of your spending.
This would be a good place to begin.
In the case that your current banker does not have this feature, you can request for a Bank Statement at a nearby branch. This would show all the transactions made on your account for a specific period. However, be wary as they would most likely charge you for this service.
Another thing to keep in mind is that Bank Statements and spending history on those applications have the following limitations:
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If you have multiple accounts – such as a separate savings account or a foreign currency account – it would be a hassle to go through each one and you may likely miss one or two transactions
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Bank Statements only show transactions made using their Debit/Credit Card and other transfers to/from that specific account. It does not show cash payments unless it was a withdrawal.
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Ideally, one should view information from the Bank as a starting point and source of data – it should not be solely relied upon.
Pro Tip!
Try to develop the habit of recording transactions immediately after you spend your money. It would become tedious and prone to error if you try to recall whether you bought a Nasi Goreng weeks after.
2. Apps & Software
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This is the easiest way to track your spending and allows you to record the transactions immediately.
Good applications may also offer end of month reports so you know exactly how much you have earned and how much (and on what) you have spent.
Understanding your habits
1. Lifestyle Inflation
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A lifestyle inflation is referred to the situation where you unknowingly increase your level of spending as your income increases and become worse off than you were before.
It is understandable that you might be happy – albeit momentarily – when you spend large amounts of Rufiyaa on things that you don’t need. Sadly, that influx of dopamine is very short lived and as human beings, we will seek out more. In time, you would see flies coming out of your wallet.
It is normal to want better things and we should all strive to increase our standard of living. The trick, however, is to spend within your means and avoid living an excessive life.
When you need to take out a loan to supplement your lifestyle of ‘wants’, know that you’re doing it at the expense of your future self’s wellbeing.
Continuously tracking your habits will provide an insight into your expenses and help manage your finances – and behavior – better.
2. Needs vs Wants
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A ‘need’ is described as an essential item or service that you cannot do without. This could be for example the electricity bill.
A ‘want’ is generally a luxury or something that you could immediately live without. These are the items that you can consider reducing (or removing) from your spending. This could be for example the number of takeaway coffees per month.
Once you are able to see the amount spent on each category, it becomes easier to identify the distinction between the what you need and what you want.
3. Budgeting
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Tracking your spending daily is the first step towards planning a monthly budget.
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You may also consider setting yourself a maximum limit for each expense category.
4. Better purchasing decisions
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We’re lucky to be living in times where there’s an abundance of choice at places of shopping. You would be surprised at the number of brands available for spaghetti!
At the end of the month when you’re reading through the expenses report, it may help you identify where you could have spent your money better. This would allow you to be more aware of the value a product represents to you – is it worth spending an extra MVR 50/- for a different brand of yoghurt when you can get something similar for much less?