Tracking your spending can be 'a colossal waste of time,' says personal finance expert: Try this instead

Tracking where your money goes can get "in the way of achieving financial goals."


Last week, the Wall Street Journal published a list of financial tasks to remove from your to-do list — among them, tracking your spending.

The piece caught the attention of Morningstar's director of personal finance and retirement planning Christine Benz. She echoed the sentiment on Twitter, calling the act of tracking your spending "a colossal waste of time," because it "gets in the way of achieving financial goals."

The tweet made waves among financial advisors and other personal finance experts on Twitter. As it turns out, people were fonder of their spreadsheets than Benz thought.

"One thing the conversation illustrated to me was just how individual-specific budgeting is," she tells Grow. "Some people were very wedded to the idea of closely tracking spending, whether it was through an app or spreadsheets or whatever. For a lot of people that's off-putting, and it might delay them from putting together a serious plan."

If you're the type of person who likes to watch over every dime that enters and exits your accounts, Benz doesn't think your efforts are for naught. But if you would if you're the type of person who would find that monitoring onerous, even with the help of software, you have other options.

Realizing you don't have to track expenses can be a 'lightbulb moment'

If getting yourself into better financial shape is akin to getting in better physical shape, tracking your expenses is akin to going on a crash diet or weighing out your ingredients on a kitchen scale, argued the Journal. For people who find the work tedious, it can work in the short-term but be hard to sustain.

Benz says she was one of those people until she read advice from personal finance writer Jonathan Clements, who recommended setting monthly savings targets and working backward from there. "It was such a lightbulb moment for me. There was another way to do this," says Benz.

"I could figure out how much I wanted to save first and then not worry if, in some month, we spend $300 on dinner or something."

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Under the model proposed in the piece and advocated for by Benz, budgeters identify savings targets, such as the classic 50-30-20 model which allocates 50% of your income to essentials, 20% for savings and debt repayment, and 30% for everything else.

Some inspection of your current financial situation is required: "You'll have to look at your income and figure out how much you can reasonably save," Benz says.

Once you identify that number, take steps to automatically divert your money toward the appropriate buckets before it even hits your bank account, says Benz. Once you know that you have money going toward, say, a workplace retirement account and a Roth IRA before you touch it, you can rest relatively easy knowing that the money in your account is yours to spend as you see fit.

When it might be worth it to track expenses more closely

Benz acknowledges that this sort of model doesn't fit every budget. "This is going to be a more appropriate strategy for high-income people, for whom a savings target is well within reach" she says.

"It seems that people with more wiggle room can use this approach, and if you have less wiggle room, you may have to spend more time with your expenses."

In other words, if you're looking to up the amount of cash you save to put toward financial goals, just picking a higher number isn't an option if you're not going to be able to make rent as a result. And if you're working with constraints, examining your expenses can be a powerful exercise.

"Keeping a log for a month, or a couple of weeks, whether it's with an app or a pencil and paper," can be essential for people looking to reduce expenses and up their savings, says Jean Chatzky, CEO of HerMoney.com and host of the "HerMoney" podcast. "It's kind of the only way that it works. It was the only way it worked for me."

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Therein lies the other reason you may want to keep track of all your expenses. It may work for you, and you may like it!

It may help you to see overspending patterns emerge: Chatzky and her daughter realized that the latter's budget was being sapped by too much ridesharing.

Maybe you want to be super-intentional about where you're spending. Maybe you just love a good spreadsheet. That's all fine, says Benz.

"I think it's worthwhile to go back over the past few months and ask yourself, 'How much have I been saving? Can I do better?'" she says.

"I think having ongoing reflections about how you're spending is super valuable. Seeing something you've spent on and realizing, 'This didn't bring me gratification.' I think that's hugely beneficial," she adds. "I love the idea of people being thoughtful about how they're spending."

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