A budget can be a useful tool if it is done properly, but just having one is not important. It is more important to track spending and know how much you spend over a period of time, especially on certain expenditures. It is easy to underestimate how much you have spent on an expense because you’ll likely only recall big or recent amounts, omitting smaller expenses that can add up.
The easiest way to track your expenses is to download your bank and credit card transactions from your providers. If you were keeping a budget you could do this monthly but if you’re not you don’t need to. The purpose of this exercise would be to evaluate how close your perception of how much you spend is to reality.
By knowing how much you are spending can help you to determine if there is a problem, if your expenses as higher than you thought, and if you need to bring those expenses down.
People are often surprised by how much they really spend on certain items just because when you look at an individual item, like say a cup of coffee that might cost just $4, it seems insignificant. But if you were to buy that cup of coffee every day you are now up to $120 a month on a small expense. If you average two cups a day that expense would multiply to $240 a month.
By tracking your expenses you give yourself a complete and accurate picture of your spending.
