Lately I’ve been noticing that one activity that has been taking up too much time and producing too little results is tracking our spending.

I’ve been categorizing our expenses with Mint for about two years now. Though in the early days I was more zealous about it, the process has always been a chore. It tends to be something I put off to the end of the month until those uncategorized transactions pile up so high, I need a good one to two hours to sit down and balance it all.

She went on to mention that she recognized how tracking her spending did produce some helpful results in the past.  It helped her and her husband take a closer look at their eating out habits and make some needed adjustments.

But over time she realized that many of the expenses were the same each month and she didn’t see the need to track them.  She’s now wondering if it’s okay to just review expenses every now and then to see how they’re doing, or perhaps  if they experience too many overdrafts.

Should You Track Every Penny?

I appreciated this post because I track every penny using YNAB (You Need a Budget) personal finance software.  It can be a time consuming exercise if you don’t stay on top of it and make sure you’re categorizing your transactions daily or at least every few days.  If I wait a week it requires at least an hour to sit down and catch up as Lindy mentions.

Is it worth tracking every penny?  I think it depends on your situation.  If you’re just starting out budgeting and learning to track your money, I do think it’s a good idea to track every penny.  Otherwise, how do you really know what you’re spending?   A budget isn’t very accurate day 1.  You have to work on it for 2 – 3 months before you can make sure it realistically reflects your spending needs.  Tracking every penny helps you create your budget.

For those of you who have had a spending plan or budget in place for a while may find that you don’t need to track every penny.  However, I think you have to be careful here to insure you don’t drop your personal money management responsibilities.  Tracking fixed expenses such as the mortgage, car payment and other regularly reoccurring bills may not produce much value.  However, tracking discretionary spending such as entertainment, clothes, gifts, and other items produces a lot of value in my opinion.

I think not tracking such expenses means your money is managing you verses you proactively managing your money.  If you don’t know what you’ve spent or aren’t budgeting these areas any longer, you’re managing your money by how much you think you have available to spend or how much you want to spend.  In either case, the money is in the driver’s seat.

So, in conclusion, I would meet Lindy half – way and suggest she group fixed expenses or her bills in one bucket or category.  She could even go as far as setting up a separate account for them.  However, I think she should continue to track her discretionary spending as it will only help her manage her finances more proactively and possibly identify more ways to save money.

What are your thoughts on Lindy’s situation?  Do you think she should track every penny?  Let me know in the  comments.

1.  Make sure you have some method for tracking personal spending (don’t try to keep it in your head). 

2.  Track personal spending often (daily or every few days).

3.  Don’t over budget with too many subcategories because it makes tracking personal spending too complicated.

All that being said, there must be some good tips out there that can make the process less time consuming.

What tips do you have for tracking personal spending?  What have you found that makes this financial management task more efficient?