Why tracking your expenses can provide huge psychological benefits
Posted onIf you’re more worried than usual about your finances in this uncertain time, you’re not alone. 2022 research by the Office for National Statistics (ONS) revealed that around 3 in 4 adults (77%) reported feeling very or somewhat worried about the rising costs of living. Half of these people felt these worries nearly every day.
Interestingly, the ONS also found that overall levels of worry tended to be similar among adults with different levels of income. So, it’s not necessarily the case that you’d be less stressed about money just because you have greater wealth.
Taking control of your finances can reduce stress and improve your overall wellbeing. One positive way that you can tackle financial worries is by tracking your expenditure – so read on to find out why this approach can be so beneficial.
Firstly, why is money so stressful?
To understand why tracking your spending can be so good for your wellbeing, it may be helpful to first understand why money causes stress in the first place.
Of course, we all need money to survive – to pay for basic human needs such as shelter, food, and heat.
In addition, financial instability can be mentally exhausting. There are likely to have been times in your life where you weren’t sure you had enough money to pay your regular commitments or to enjoy a night out. At these times, finances take up more mental bandwidth, resulting in you thinking much more about how you spend the money you have.
This might be true today if you’re worried about rising mortgage costs, utility bills, and other essentials such as food and fuel.
Furthermore, money likely makes up part of your identity. Financial stability influences your sense that you can provide for your family or be financially independent. Conversely, financial insecurity can lead to a sense of shame, helplessness, loss of control, and decreased motivation.
So, how can tracking your expenses and budgeting help you?
Budgeting can help you to restore a sense of control
While many people dislike the idea of budgeting or tracking their spending, it can help you to take positive steps towards your goals, reduce stress, and restore a sense of control.
When you take a proactive approach to budgeting, you begin to identify what is uniquely important to you, helping you to commit to concrete steps to achieving your personal goals. It’s the same approach we take to financial planning – namely that focusing on your goals makes it more likely that you’ll achieve them.
Tracking your spending can also help you to see your progress and ease anxiety.
Knowing where your money is going can boost your happiness
As the old saying goes, “money can’t buy happiness” – although spending money in the right way can actually boost your wellbeing.
According to a study in the Journal of Consumer Psychology, you will tend to feel happier when you spend your discretionary money on:
- Social experiences, such as holidays or get-togethers with friends or family
- Buying time, such as hiring a cleaner, gardener, or someone to do your ironing
- Other people, in the form of gifts or charity.
When you track your spending, you’ll start to think about the type of expenditure that brings you pleasure. You’ll begin to notice discrepancies between what you spend money on and what you truly value. This enables you to adjust your spending so you can allocate more money to those things that bring you joy.
5 tips for budgeting and tracking your expenses
So, if tracking your expenses can boost your wellbeing, what is the best way to go about creating a budget?
- Review your outgoings and see how you spend your money. Identify your major spending areas (such as housing, transportation, and food) and estimate your average monthly spending in each category.
- Set a budget. After you’ve identified how you tend to spend your money, it should be easy to create a realistic monthly budget for future spending and saving.
- Break down your budget. It can help to split your money into necessities (what you have to pay for), discretionary spending (that you could cut back if you needed to) and long-term goals (such as paying off debt and saving for the future).
- Start tracking. Record your spending in each category and how it matches your budget goals. This helps you to improve your habits and increase your sense of confidence and control.
- Give yourself a pat on the back. Reward yourself for taking steps to become financially secure – and don’t worry if it’s a slow process. Small is better than nothing!
Get in touch
If you’d like to find out how you could take control of your finances and make progress towards your long-term goals, we can help.
Please email us at enquiries@blackswanfp.co.uk or call 020 3828 8100 today.
Please note
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
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