Updated on March 18, 2024.
Creating a monthly budget that tracks your income and expenses can have some serious benefits—and not just for your wallet. An increasing amount of research is linking money worries to health concerns, including not getting medical treatments.
But there’s good news: It really is possible to develop and follow a manageable monthly budget for the long-term.
5 reasons to track your spending
Before we get to the how, let’s discuss why you should be tracking your incoming and outgoing money:
It’ll help you identify spending patterns. Many of us spend without thinking about it. Buying a $2 pack of gum each day, for example, adds up $730 after a year. Tracking every single expense helps you to learn more about your spending and saving habits—both good and bad—so you can assess and reset. Once you get a better look at your patterns, you'll learn how much cash you’re really paying for things you may not need.
It’ll help balance your spending. Many budgets include different categories for spending, such as food, clothes, and housing. If you spend too much in one category, such as entertainment, your budget will tip you off. This can help you more evenly divide your money and help prevent future overspending.
It’ll help you achieve your short- and long-term financial goals. Are you saving for a nice pair of shoes? Or maybe a better refrigerator? By building savings goals into your budget, you may find it easier to pay for both everyday items and bigger purchases. If you are able, put a small amount of money—any amount helps—into a savings account each week or month. Over time, it can add up.
It’ll help you spot fraud. Keeping a close eye on your regular spending can help you identify unauthorized charges on a credit card or bank account right away. It can also help you avoid potential complications down the road, like identity theft.
It’ll make you healthier. Money troubles are a big source of stress for many Americans. Uncontrolled, chronic stress can affect your health and wellness in countless ways, including raising your risk for several chronic illnesses. Maintaining a monthly budget won’t just keep your wallet happy. It’ll help keep your brain, heart, lungs, digestive tract, and emotions healthy, too.
How to start tracking your spending
Whether you want to track every single expense in a notebook, spreadsheet, or a mobile app, there are tons of ways to manage and monitor your finances. The important thing is to choose the right tracking method for your schedule and lifestyle. If budgeting becomes a hassle, you probably won’t do it.
Once you’ve chosen a method, identify the spending categories you’ll have each month—and if possible, include a budget for savings. If your finances are combined with a partner’s, be sure to discuss exactly how much is reasonable to spend in each category throughout the month, so there are no surprises from either of you. Then, start tracking—and saving.
