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Personal Finance

Budgeting 101: Why Tracking Pennies Is Pointless


Budgeting can be very helpful when it comes to tracking your expenses and ensuring that you are living within your means. However, for budgeting to work the process has to be a simple one, and not overbearing. After all, the more difficult and time consuming that it is, the less likely that people will want to do it, and that’s the key: making budgeting easy to do.

While some people (e.g. accountants) might want to reconcile to every penny spent, it’s just not a worthwhile exercise. Not only does your focus move towards the little things and away from the big picture, it also makes the process very onerous. While you don’t want to disregard small transactions, since in large volumes they can accumulate to a lot of spending, the focus shouldn’t be on completely reconciling every penny, but on tracking your expenses.

By seeing where your money was spent during the month, you have an idea of what habits are problematic and where there might be opportunities to cut costs, and that’s what should be the end goal. Budgeting should be seen as a constant work in progress where you try and adjust and reformulate strategies to become better and better each successive month. It’s not going to be a perfect process right out of the gate, and you shouldn’t expect it to be either.

There’s no one way to setup a budget, and you should be open to adjusting so that it’s a process that works for you. But trying to account for every penny is about as helpful as trying to track every second of how you spend your day.