For many people, the main benefit of creating a personal budget is to help reduce accidental spending.
Accidental spending is the purchases you make that you don’t really need or want, but you don’t think about.
If you review your credit card bills at the end of the year, you’ll find many purchases you made that, if you had to do it over again, you wouldn’t make.
For example, you might see that you purchased a $30 blouse in May that you wore once and you probably won’t wear again (or more than once a year). You and your partner might have gone to see a movie, then went to dinner after, for a total cost of $63. It wasn’t a really great movie and you had plenty of food at home, but you felt like going out.
As you review your purchases, you’ll find loads of purchases like these that can add up to $1,000-$3,000 (or more).
Therefore, one of the main benefits of budgeting it tracking your spending each month and reviewing it. You’ll find out those $7 stops at Taco Bell, that $30 blouse, the $6 monthly Hulu subscription you’re not using, the $60 in home meal kits you ordered and on and on and on add up.
Remember, these aren’t purchases you want, use and enjoy, like your Starbucks or gym membership — these are purchases that, if you had it to do over again, you wouldn’t make.
Tracking your spending each month will open your eyes to just how much you might be overspending, and how you can stop it without cramping your style.
Again, you don’t want to go through life without ever buying another cup of coffee or going to a movie. That type of frugal living is brutal.
What budgeting can do to help you immediately improve your personal finances and retire with an extra $500,000 or more is to help you spot and stop accidental spending.
But only if you track your spending each month.