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 increases money mindfulness, reduces stress, helps you process your spending, 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. Here are some simple steps be more money mindful and stress less about your finances.
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. This helps you feel in control of your money, not the other way around. Further, 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 spending assigns 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 your emotions about money, making finances a little less scary. (Hint: the Nav.it App makes assigning an emotion to each purchase as simple as swiping through your transactions). Once you understand how much you’re spending and how your purchases make you feel, you’re well on your way to being a money mindful pro.
In reality, not all financial decisions make us feel bad. Going through each purchase can alleviate negative feelings and identify which purchases were worth it. What types of spending made you feel happy? How about 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 at 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 than they save for retirement. Saving that coffee money for just a couple of months could quickly add up, helping you generate wealth.
Maybe lattes are non-negotiable for you, but it doesn’t hurt to make your own at home every once in a while (trust me, coffee grounds and a milk frother are a good investment). If you still don’t want to budge on that front, that’s okay. Providing context to your spending can help you identify other expenses that you can live without. Lean into what makes sense for you!
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’s unlikely to significantly impact 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 that aren’t aligned 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 doing your research and reading reviews, you’ll likely experience cognitive dissonance. Rationalizing your spending might include thoughts like “reviews aren’t very helpful anyway”. 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. Practicing money mindfulness by reflecting on expenses allows you to acknowledge purchases that conflict with your core values, and actively reviewing these conflicts can help strengthen those values. Ultimately, this increases the chances of your future purchases being aligned with your beliefs.
You’ll save more money
That sounds like something we can all get on board with, right? Well, expense tracking plays an important role in curbing 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 the recent purchases that weren’t so necessary. Then, ask yourself these questions:
Is there a common cause behind these purchases?
Are you more inclined to impulse buy when in a certain mood?
Is there a consistent situational factor that leads to these purchases?
Whether driven by emotions or situations, identifying the cause of your impulse purchasing behaviors can help prevent future buys. If you make purchases to improve your mood, you’re not alone. During the pandemic, 72% of Americans reported that impulse buying positively impacted their moods. Alternatively, replace emotional impulse buying with a healthy habit like going for a walk or meditating. Reflecting on your expenses can help you become more mindful and aware of your triggers. This way, you can avoid those triggers and save more money.