How Tracking Your Money Can Reduce Stress and Save Money
by Madde Horn
You know what they say, a transaction check-in a day keeps the overspending away. While it may seem retroactive, expense tracking has so many benefits when it comes to managing your money.
Tracking your expenses reduces stress, helps you process your spendings, and increases savings.
How is this possible? The answer is all in reflecting on your spending habits. Taking the time to look back at your recent transactions provides context to your purchases. When you make a purchase, you might not be happy about the money leaving your wallet, but handing over a piece of paper or swiping a plastic card doesn’t tell you how the money adds up. Let’s clear this up: spending money isn’t bad. Mindless, excessive spending is what we want to avoid.
Knowing where your money is going provides a sense of control
Only 60% of people feel they have a general understanding of where their money goes. Expense tracking makes it clear where every cent is going which helps you feel in control of your money, not the other way around. 75% of people agree that tracking your money results in decreased anxiety. Because it brings awareness to how much you are spending and where your money is going, there are fewer unknowns which means fewer reasons to stress.
Reflecting on spendings puts a feeling to each purchase
Finances are the highest source of stress for 73% of Americans, but this doesn’t mean every purchase leads to guilt and stress. Reviewing your purchases gives you a chance to break down money emotions and make finances a little less scary. (Hint: the Nav.It App makes putting an emotion to each purchase as simple as swiping through your transactions).
The reality is, not every financial decision makes us feel bad. Going through each purchase can alleviate negative feelings as you identify which purchases were worth it, making you feel happy or even just neutral. Realizing that personal finances aren’t just made up of negative feelings can boost your confidence.
Reviewing purchases puts your expenses into perspective
Beyond helping with budgeting, reflecting on your spending gives you time to think about what a purchase means to you. This helps align your actions (purchases) with your values (what you care about).
A $5 latte is easy to justify in the moment. But that latte money adds up quickly if it becomes a habit. Say you get a latte twice a week. After 4 weeks, you’ve already spent $40. At $10 a week, you’re spending $520 in a year. And this is a generous estimate. The average American actually spends $1,100 a year on coffee with 41% spending more on coffee than they save for retirement. Just a couple months of saved coffee money could add up fast towards generating wealth. Maybe lattes are a non-negotiable for you, but consider making your own at home (trust me, coffee grounds and a milk frother are a good investment). Providing context to your spending can help you identify other expenses that you can live without.
On the other hand, maybe you decided to go out to eat at your favorite restaurant. While this might lead to some sense of guilt, it’s misplaced. If this is a rare occurrence, not a habit, it most likely is not going to have much impact on your budget. You might feel like your money could have been spent on something more important to you, but ask yourself whether your purchase was valuable to you. Did the meal cheer you up after a long day? If so, then it was worth it. 47% of Americans report feeling guilty about going out to eat, despite food from their favorite restaurants ranking in the top 10 purchases that make them happy. You work hard for your money and you deserve to treat yourself on occasion. Don’t beat yourself up over the occasional purchase that isn’t taking away from your bigger goals.
Over 50% of people regularly feel guilty over purchases. Why is this? When you spend your money in ways misaligned with your values, you might experience cognitive dissonance. Cognitive dissonance is the mental discomfort that occurs when you hold two conflicting beliefs or ideas. People seek consistency, so this inconsistency leads us to justify our actions.
For example, if you consider yourself to be a cautious spender, but then you buy a new phone without spending time reading reviews, you’ll likely experience cognitive dissonance. Rationalizing your spending might include thoughts like “reviews aren’t very helpful anyways”. Considering that 95% of our purchasing decisions are made subconsciously, it makes sense that we sometimes have to go out of our way to rationalize them.
Bringing awareness to your conflicting thoughts can improve your future decision-making processes. Reflecting on expenses allows you to acknowledge purchases that conflict with your core values. Actively reviewing these conflicts can help strengthen your core values and increase the chances of your future purchases being aligned with your beliefs.
You’ll save more money
Expense tracking can help curb impulse purchases. Knowing you went over your budget is one thing, but understanding why can prevent you from doing it again. When you’re aware of where your money is going, it’s easier to know how to save more.
Make a list of all of your recent purchases that weren’t so necessary then ask yourself these questions:
Is there a common cause behind these purchases?
Are you more inclined towards impulse buying when in a certain mood?
Is there a situational factor leading to these purchases?
Whether your impulse purchases are emotional or situationally driven, identifying the cause of your behavior can help prevent future purchases. If you find yourself making purchases to improve your mood, you’re not alone. 72% of American report impulse buying positively impacting their mood during the pandemic. Replace emotional impulse buying with a healthy habit like going for a walk or mediating. Reflecting on your expenses can help you become more aware of your triggers so that you can avoid them and save more money.