It doesn't matter how you do it, but if you carefully track your spending and savings you'll likely improve your results. There is an old adage in management theory: What gets measured gets done and what gets measured and reported gets done better.

If you carefully track your spending, it will allow you to see how you are spending your money and make strategic changes. Consider the following examples:

Credit card statements are not a substitute

Reviewing your credit card statements when they come is wise for a variety of reasons, including detecting fraud, but it isn't a substitute for carefully tracking your spending by category. Just reviewing the statements won't tell you how much you've spent dining out or on your favorite hobbies (even if the card statement can separate restaurant charges from grocery stores, it can't tell whether you bought a new drive, a bag of groceries or baby clothes at Walmart).

Much of our spending is discretionary

Because we make choices about most of our spending each month, it is important to track it. We make hundreds of purchase decisions each month. Without tracking our spending, we have no practical way of knowing whether we've overspent in one area, or not. This is especially true for the categories of spending that are the most flexible, like entertainment and dining out.

Income and spending is divided

The problem is compounded for families because there may be several people both earning money and spending it. How will you know what your spouse spent if you're not tracking the spending and sharing the data?

Real time reporting is better than periodic reviews

The closer you can get to tracking spending as it happens, the better. Optimally, you'd be able to update the reports daily so your spending for the 20th day of the month is guided by knowing what was spent the first 19 days. Even monthly reporting is better than nothing because understanding where you overspent last month can help bring spending under control next month.

Technology makes it easy

In this electronic world where much of your spending is being tracked by others anyway, it is relatively easy to track your own spending. provides on-line software that tracks all of your spending in real time at no charge. You can customize reporting and planning tools to make everything simple and easy. Quicken also offers software, which you can download for a fee, with more robust capabilities and that can download data from the Internet in real time to help you track your spending.

Tracking spending may lead to budgeting

Even if you never set up a formal budget, if you track your spending carefully and regularly, you'll begin to adjust your spending to fit your long term goals. Eventually, tracking your spending guides your spending, having the effect of a budget and empowering you to accomplish what you want with your money.

Spending is easier and more natural than saving. If you want to do more of the latter and less of the former, tracking your spending is a powerful way to take control of finances. With today's technology, it is almost effortless and it's free. Just a few hours each month can help you take control.

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