What are the advantages of keeping track of your personal finances? Is it only worthwhile if I earn "enough"? Why should I bother?

  • 14
    Are you asking about the advantages of using software vs. not using software? Are you asking about true double-entry accounting methods vs. simpler methods? Or are you asking about the advantages of keeping track of your personal finance transactions at all vs. not?
    – Ben Miller
    Commented Dec 5, 2016 at 18:19
  • Removed the stuff about software; not so important. I was wondering about "at all". But comments about double-entry vs. simpler methods are appreciated, if you/the answerer thinks it's necessary.
    – Psirus
    Commented Dec 5, 2016 at 18:22
  • The term you are looking for is 'budgeting'. Looking online (or on this site) will find you many additional resources in addition to what Ben has provided below. Commented Dec 5, 2016 at 19:15
  • @Grade'Eh'Bacon: Isn't there a difference between "budgeting" and keeping track of your finances? I thought the former involves you setting aside budgets for things you want to do (e.g. up to $N for food this month, $M for clothes, etc.), whereas the OP seems to be asking about being aware of what's happening to his money (looking at his statements, not spending more than he has, trying to keep money aside as a safety net, etc.)? I feel like you could do either without doing the other, and the former seems to be much less necessary than the latter if you're living relatively comfortably.
    – user541686
    Commented Dec 6, 2016 at 9:11
  • 6
    After I started tracking and categorizing all of my income and expenses using software, I found that despite no conscious, intentional change in my behavior, spending or saving habits, I was more prosperous.
    – user45554
    Commented Dec 6, 2016 at 13:47

3 Answers 3


In my opinion, every person, regardless of his or her situation, should be keeping track of their personal finances. In addition, I believe that everyone, regardless of their situation, should have some sort of budget/spending plan.

For many people, it is tempting to ignore the details of their finances and not worry about it. After all, the bank knows how much money I have, right? I get a statement from them each month that shows what I have spent, and I can always go to the bank's website and find out how much money I have, right? Unfortunately, this type of thinking can lead to several different problems.

  1. Overspending. In olden days, it was difficult to spend more money than you had. Most purchases were made in cash, so if your wallet had cash in it, you could spend it, and when your wallet was empty, you were required to stop spending. In this age of credit and electronic transactions, this is no longer the case. It is extremely easy to spend money that you don't yet have, and find yourself in debt. Debt, of course, leads to interest charges and future burdens.

  2. Unpreparedness for the future. Without a plan, it is difficult to know if you have saved up enough for large future expenses. Will you have enough money to pay the water bill that only shows up once every three months or the property tax bill that only shows up once a year? Will you have enough money to pay to fix your car when it breaks? Will you have enough money to replace your car when it is time? How about helping out your kids with college tuition, or funding your retirement? Without a plan, all of these are very difficult to manage without proper accounting.

  3. Anxiety. Not having a clear picture of your finances can lead to anxiety. This can happen whether or not you are actually overspending, and whether or not you have enough saved up to cover future expenses, because you simply don't know if you have adequately covered your situation or not. Making a plan and doing the accounting necessary to ensure you are following your plan can take the worry out of your finances.

  4. Fear of spending. There was an interesting question from a user last year who was not at all in trouble with his finances, yet was always afraid to spend any money, because he didn't have a budget/spending plan in place. If you spend money on a vacation, are you putting your property tax bill in jeopardy? With a good budget in place, you can know for sure whether or not you will have enough money to pay your future expenses and can spend on something else today.

This can all be done with or without the aid of software, but like many things, a computer makes the job easier. A good personal finance program will do two things:

  1. Keeps track of your spending and balances, apart from your bank. The bank can only show you things that have cleared the bank. If you set up future payments (outside of the bank), or you write a check that has not been cashed yet, or you spend money on a credit card and have not paid the bill yet, these will not be reflected in your bank balance online. However, if you manually enter these things into your own personal finance program, you can see how much money you actually have available to spend.

  2. Lets you plan for future spending. The spending plan, or budget, lets you assign a job to every dollar that you own. By doing this, you won't spend rent money at the bar, and you won't spend the car insurance money on a vacation.

I've written before about the details on how some of these software packages work. To answer your question about double-entry accounting: Some software packages do use true double-entry accounting (GnuCash, Ledger) and some do not (YNAB, EveryDollar, Mvelopes). In my opinion, double-entry accounting is an unnecessary complication for personal finances. If you don't already know what double-entry accounting is, stick with one of the simpler solutions.

  • 9
    This actually says pretty much everything I was trying to say with my answer, but better. One thing I would suggest adding, though, is that it's even more important to keep track of your finances when you don't make a lot of money, because in that situation, even a reasonably small unexpected expense could cause serious financial problems. Someone who has good finances and is making $100,000 a year can probably wing a $1,000 unplanned expense without much trouble and without resorting to debt, but someone who makes $25,000 a year is going to be hard pressed to find $1,000 quickly.
    – user
    Commented Dec 5, 2016 at 19:15
  • 3
    @MichaelKjörling Agreed. For someone with a low income, items 1 & 2 above will happen before long. Those that have a large income and are naturally low spenders can get away without planning for a lot longer. However, they will still have trouble with items 3 & 4.
    – Ben Miller
    Commented Dec 5, 2016 at 19:21
  • As long as one earns significantly more than he spends I don't see the point of going through this. 1/ is moot. 2/ can be done easily by transferring leftover money into another account every month in case something goes bad. 3/ and 4/ is about personal philosophy and should be dealt with through introspection. I have never done any budgeting for my self and am still alive at 32, with enough money on the side whenever problems come...
    – Shautieh
    Commented Dec 7, 2016 at 10:19
  • 2
    Overspending. In olden days, it was difficult to spend more money than you had." Even so, it was still easy to spend what you had (men drinking their wages on payday, for example, or women buying "pretty clothes") before the rent was due.
    – RonJohn
    Commented Dec 7, 2016 at 18:56

Everyone should keep track of what they spend. When you see how much you are spending on each category of expense, you can make good decisions about how much your life is improved by something vs. how much you spend on that thing.

Everyone makes better decisions when they are informed by accurate information about those decisions. There's no reason why personal finances are different from any other decision you make in life. This remains true whether you make very little or very much. Some people define rich as being able to live on less money than you earn.


I recently made the switch to keeping track of my finance (Because I found an app that does almost everything for me).

Before, my situation was fairly simple:

  • I had more money than I spent
  • I tended not to spend much anyway.

I was unable to come up with a clear picture of how much I was spending vs saving (altho I had a rough idea).

Now I here is what it changes:

  • I can compare wether I spent a lot this month or not. (Spoiler: it's 1. Rent 2. Food)
  • I know exactly how much I am saving, every month.

What I can do now:

  • I know how to increase my savings (be more careful doing grocery shopping, find a new home).
  • Once I come up with an investment plan, I know how much I can allocate to this (useful if you must make fixed payments)
  • I can project myself in the future and forecast how much I will have in a few years. Useful if I want to know when would be the right time to buy a house.

Is it useful ?

Since I don't actually need to save more than I do (I am already saving 60-75% of my income), 1) isn't important. Since I don't have any visibility on my personal situation within a few years, 2) and 3) are not important.


Since I don't actually spend any time building theses informations I am happy to use this app. It's kind of fun. If I did'nt had that tool... It would be a waste of time for me.

Depends on your situation ?

Nb: the app is Moneytree. Works only in Japan.

  • For me it used to be 1/ food 2/ rent. Good ramen are so cheap in Japan I guess! About your savings, you would know how much you are able to save every month just by comparing your balances. That's enough information for me as I don't want to plan my life away anyway.
    – Shautieh
    Commented Dec 7, 2016 at 10:25
  • @Shautieh My previous bank wouldn't even offer that option... And yes ramen are cheap, but the delta probably comes mostly from the rent being expensive.
    – Antzi
    Commented Dec 7, 2016 at 10:43

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