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Tuesday, September 02, 2014

How important it is to formally track your monthly expenses?

I overlooked monthly expense tracking for 10 years of my earning life, and am still paying a heavy price. Simple things have immense power. You may decide to ignore them at your own peril.

Why should you track expenses?
Tracking your every day expenses under various heads is not only important, but making it a daily family routine can actually help you reduce your monthly expenses by as much as 20%. Yes, it’s proven through multiple scientific studies that just the act of tracking your expenses consistently can reduce your expenses significantly.

And remember that 20% money saved is as good as 100% more money earned, because you usually save only 20% of your income. Money saved is always equal to approximately five times the money earned. Do not underestimate the power of tracking your expenses and writing them down every night before your family goes off to bed.

What are some common expense heads?
There are some commonly used expense heads that you can use. You can obviously customise them as per your need.
  • Grocery
  • Fuel
  • Entertainment
  • Eating out
  • Travel
  • Education
  • Telephone and Mobile
  • Life Insurance
  • Health Insurance 

What process should you adopt for tracking expenses?
The best way to track your expenses is to make it a family exercise every night. Involve your spouse, children and parents. Spend 5 to 10 min together every night, to jot down your expenses for the day. 
This activity will also ensure that you will nurture good money management practices in your children, without having to specifically teach them. That your family bonding will increase and you will get new money saving ideas from your kids - are just some of the bi products of this activity.

Can i download a sample Expense Tracking Sheet?
Yes, you can download a sample sheet by clicking on the below link on the Freedom Portal.
Download Expense Tracker
You can also visit the Freedom Portal and go through the book From the Rat Race to Financial Freedom for more exhaustive help. You can even connect with the author of the book by emailing him at help@manoj-arora.com for specific help that you may need.

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