The importance of manual tracking
“Chop your own wood and it will warm you twice.”*
When I meet with someone to coach for the first time, the question of “how much work will I have to do?” invariably arises. This common concern expressed is that the individual feels they don’t have enough time to work on their finances. The person usually tells me they don’t want to track their expenses and they want to know if there is an app I recommend to track their expenses for them. There is nothing wrong with wanting to outsource seemingly menial tasks. And, there is an app for everything these days. Apps can be helpful and can save us time. When I first started coaching, I told my clients that they could use an app if it was the only way they would track their expenses – essentially, I didn’t want to create a barrier in their attempt to get financially fit. But, I have since changed my mind and I believe that there is only one way to track your expenses – manually.
Before I started learning about finances for myself, I would glance at the “tracking” offered by my credit card company. The tracking was offered in the form of a pie chart that separated my spending by category. I would glance at this, once a month, as I went to pay my credit card bill. After looking at the pie chart, I left just as baffled as I started, wondering how I spent so much money on “who knows what”.
The categories offered by my credit company are vague and non-specific. They include, Home, Shopping, Personal, and Travel, to name a few. I can tell you, I travelled nowhere last month, yet there is $19.95 charge attributed to the Travel category. For the shopping category (which shopping is all spending, right?!), I see over $700. I have no clue what counted towards shopping by the company’s tracking. The admittedly belabored point here is that this data doesn’t tell you much. It gives you broad, inaccurate descriptions informing you that, well, you spent money!
Tracking serves a few purposes. By accurately tracking your expenses, you can stick to the budget that youcreate. Knowing what you earn, what you spend, and where you stand on your goals helps you become financially fit. It also, and very importantly, allows you to be mindful of what you are using your money for. This can only be done through manual tracking – you must decide where your money goes, based on your values and goals, and then through your actions, use your money towards those values and goals. Manual tracking helps you have that confirmation.
Tracking through an app takes little time. And, arguably, provides very little value towards the purposes that we want to get from tracking. Manual tracking initially might take a little time. However, very quickly, manual tracking becomes only minutes a week. This happens for a couple of reasons. First, you get quicker at it. When it’s a regular part of your routine, done a couple of times a week, it is easy to peek at your methods of spending and your receipts, and capture your expenditures. It also becomes quicker because you become a more mindful spender and likely either are spending less or know exactly what you are buying without needing to reference receipts or rack your brain.
When I first started tracking, I had an eye-opening experience. I was looking back at a previous month’s expenditures. I wanted to know where I had been spending. I saw a charge at Target for $150. I had no idea what I bought at Target. My credit card company probably categorized this expenditure as shopping but it could have also been clothing, food, or personal health. This is when I realized that I needed to know what I was buying and what category it belonged to. If I couldn’t remember what I was buying, were they things I cared about? Were they things that went towards my goals? Were they things that added or detracted from what I wanted from life?
Manually tracking your expenses not only helps you become financially fit in the long run, but it also helps you be mindful about where you are spending your money. The effort in accomplishing the task is just as valuable as the final result. “Chop your own wood and it will warm you twice.”*
*In researching the origin of this aphorism, I learned that it and versions similar are attributed to Henry Ford, a Chinese Proverb, Frederick Knight, and a Salada Tea Bag label from 1961, amongst others.