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Tracking your spending in an App is useless unless….

I have a friend whom I consider an outlier in that she started early tracking what she spend her money on. She has an excel workbook where she inputs her daily or monthly spending to a rather granular detail.

This is hard to do, unless you are a data nutcase like me. Ask 10 person and likely 8 of them will tell you,  They can spend their time doing something much better.

The problem for her is that, despite this, she share that she have a problem controlling her spending.

The problem here is that, while tracking where you are spending your money is good, that is just Data Collection.

Fancy apps do not magically make your financial situations better. Apps are the enabling devices, or the support tools.

What is equally important is that, you need to review and reflect upon your data, there after create some processes, systems or habits to change how you live your life currently.

Related: How to carry out a systematic zero-based budget for personal use

In You Need a Budget (or YNAB), they advice not to over categorize your budget. Bring out a certain targeted area where you are having problems.

Suppose you have a problem with clothes. You buy a lot of them (or are you buying a lot at all?). You break this spending out in a category call Clothes to collect the Data.

With the data, you can create some plans:

  • Cut your Clothes money allocation by 10% for the next month. Slowly ease it down instead of setting an unattainable target of 50% since you were having a problem with it in the first place. Then cut another 10% the following month.
  • Spend more time doing some other activities such as sports. When you fill your calendar with some other activity, you have less time for shopping
  • Take a different route and bypass these shopping haunts. Less toxic environment, less chance to be tempted

A meaningful change here affects the Reality, and further collection of Data will show whether it is working or not.

If it doesn’t work that well tweak the Change.

This is how Reality, Data and Change come together to improve your financial situation.

And while we are on this topic, you will notice that collecting Data through spreadsheets, paper or a mobile app is important as well.

If you do not have Data, how do you know what to change and how much to change?

These three items in the diagram are equally important.  Don’t blindly collect the data and do nothing with it.

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Mickey J

Monday 27th of April 2015

I'm using a mobile app to track my expenses and that does the same thing as YNAB (just that I don't need a computer for that).

I totally agree with you that tracking your expenses is useless unless you review and reflect on your spendings. I've been recording my expenses without reviewing them for the past 6 months and naturally, nothing has changed.

I started combining the data to put together a 6-month moving average expense index for each category and started using those figures for my budgets. This month my expenses have reduced significantly. For once, I'm actually looking forward to blog about my montlhy expenses report.


Monday 27th of April 2015

Hi Mickey,

I am glad that you have made a better sensing of your data and how it helps you. Sometimes you wonder if u need to keep certain categories or not. Keeping when you don't have a problem i guess is needed for some variable ones just to sense if you are keeping discipline.


Sunday 26th of April 2015

Great fan of your blog!

I've been using YNAB for the past 5 years since i've started working and i must say it is a wonderful application. It not only tracks spending, but limits it as well and allows me to work around the amount of money i have at one time. Of course the mental discipline of tracking and adhering to one's spending limit is required as well - which is the most important aspect of personal finance in my opinion.


Monday 27th of April 2015

Hi Tropikul,

Thanks for visiting my humble blog. I think you hit the nail on the head that you still need some discipline to stay on it. I am not sure but i suppose for folks like you who start working, starting at a good state, your goals are different from folks who have a problem. Still i can see you guys needing to make small changes weekly to stay on the threshold as well.

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