Should we track expenses? We’ve previously been spoon-fed the notion that we must track what we spend in order to understand where our money goes and to adhere to a budget. Some do it using Quicken, Mint, YNAB, spreadsheets, whatever. Done diligently and precisely, tracking can make you aware of when you come up against pre-determined spending limits. Or provide clarity on where your money goes.

But here’s the deal about tracking….

…it blows.

Tracking expenses is onerous. No one wants to be doing it – not even the CPA writing this.

Understanding this, let’s consider whether we really need to track expenses? The answer: sometimes…but not as much as we all think we need to.

When should we track expenses?

We should track expenditures that are tax-deductible and not otherwise reported to us in total at the end of the year. Here are some examples:

1. Charitable contributions – and only if these are deductible for you (this depends on your tax situation).
2. Self-employed business expenses – there could be a whole separate blog on this. We’ll save that discussion for now. If not self-employed, skip along and disregard this point.

There are other expenditures that are deductible but already tracked and reported for us so do not require our separate tracking. These include mortgage interest, 529 contributions, property tax payments, retirement saving contributions, student loan interest.

What about living costs? Shouldn’t we track these?

Unless you’re self-employed: nope, do NOT track your living costs.

What to do instead of tracking?

1. Identify your recurring monthly living costs. These are necessary, largely unavoidable costs each month including your rent or mortgage, utilities, food, transportation. Debt payments and subscriptions or memberships are also included here since they are committed (unless you do something like pay them off or cancel).
2. Recognize that the majority of these living costs are fixed, with the big exception being:
   – Food
   – Transportation, in particular gas and maintenance
3. Commit one credit card to daily charges for groceries (but not restaurant food) and gas. Check this balance each month against your expectation of what you normally spend. Trust me: you’ll find that this doesn’t vary much from month to month. Go here to shop for the best credit card offers currently available.

Now, isn’t this easier than tracking?

Should I track discretionary spending?

If you prioritize paying your living costs first, then what is left after that is for discretionary use. Pull that out in cash and spend only that. If you can do this…then no tracking required!

But what if I want to track expenses?

Then you’re weird, but knock yourself out with it. If you get your kicks on seeing where your money went all month or year, don’t let me stop you. But do consider that many credit cards provide a spending summary each month or at year-end – you could let them do the heavy lift of tracking.

Are you tracking with me now? 🙂

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