What is the role of expense tracking in the long term?

Question

Exactly as the title says: what is the role of expense tracking in the long term?

I can understand expense tracking being very beneficial in the short term if you've recently changed your lifestyle or are going through any sort of financial difficulties, but what about after this has passed? What is there to be gained by painstakingly tracking all your expenses year after year even when you're doing well financially? Obviously tracking expenses takes a non-negligible amount of time, so I'm wondering what you get out of it. Would the long-term data and reports you'd get from doing this be worth the time and effort it takes to enter in the receipts, reconcile accounts, etc.?

(I understand there are sites like Mint.com which can remove a lot of the work, but in the interest of privacy, I prefer to offline tools like GnuCash).

Answer 1

If one did the tracking and found that all is well, things may be fine in the short term. But, after a time, if you don't pay attention, it's easy for items to creep up. The restaurant costs rise, as might vacations or gadgets.

Truth is, if you have a decent saving rate, say 20%, and no debt, except for the mortgage, you may decide to stop tracking, it's a great 'early warning' process, but if your balance sheet is heading in the right direction, I'd not criticize the decision to just enjoy that you are on the right track.

Answer 2

Expense tracking can be useful in several ways, even if you're not in financial difficulties or in the midst of a lifestyle change.

1. Even if you only keep a basic budget, e.g. money in, money out, savings, etc. keeping track of this information allows you to estimate how your financial situation will change if you incur additional expenses, e.g. have a child, move to another city, etc. I'm reassured that I'll be prepared in the event of a lifestyle change before I'm in the middle of it.

2. It may make saving for certain goals easier. Once again, if you have some idea of what you earn, spend, and save each month, it may be easier for you to estimate exactly how much extra you'll need to save to make the down payment on that house, car, etc.

3. In my case, it helps me keep myself on a budget. I track expenses so I can see that I'm still keeping within my spending limits in each category (I keep a very detailed budget, however). This goes along with point #1, because having this information allows me to plan ahead for buying gifts, medical expenses, etc.

Some of these points may be specific to me, because I'm young and will probably experience several major lifestyle changes in the near future (grad school, cross-country/international moves, etc.) but it should demonstrate that expense tracking can have different value for different people.

Also, expense tracking doesn't have to be a lot of work. I use an Excel spreadsheet that keeps track of my expenses. It took a couple of hours to set up the spreadsheet, but that's a fixed cost. Now, I just enter my expenses and they're automatically aggregated into monthly expense reports. Once a year, I drag down the formulas and I'm ready for the next year.