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As you look ahead to 2025, are you aiming to get a better handle on your finances? Are you trying to save for an important goal or want to grow that nest egg for retirement?
For some of us, financial matters can seem daunting — we think they’ll take too much time or require specialized knowledge.
Whenever you want to make a major change in your life and create a plan of action, it starts by taking a full (and honest) accounting of where you stand right now. In the case of your finances, that means understanding your income and expenses.
For most people, income is easy. Expenses, on the other hand, are often underestimated. Once you start adding up how much you spent on takeout over the course of a year, the results may surprise you — and not in a good way.
The five-minute habit
When CNBC Make It asked Certified Financial Planners (CFPs) to name the top way to improve finances in only five minutes, many said you need to know where your money is going. And that means keeping track of how much you spend.
Tracking your expenses is helpful for many aspects of financial planning, and it takes only minutes a day. You can save yourself the trouble of logging expenses with an app that tracks activity directly from your accounts.
With Rocket Money, you can track your expenses to the last penny and keep an eye on where your money is going.
All you have to do is link your checking, savings and credit cards accounts. You can also get balance alerts if your checking account balance falls below a certain limit, or when you spend above a set limit on your credit card.
Rocket Money’s subscription management algorithm can help you identify your recurring subscriptions that may be draining your budget. With their concierge services, you can access their subscription cancellation assistant, and cancel any unwanted subscriptions with a couple of taps. This way, you can potentially save up to $740 per year.
Rocket Money’s concierge service can also help you lower your bills. Their negotiator works on your behalf to get the best rate on your cell phone and cable bills.
Why tracking your expenses pays off
Many people feel motivated to plan a budget, but never follow their spending to track how well they’re following it, or how they can improve it. Tracking your expenses ensures your budget is realistic, and that you’re getting the most out of your money. Here are three benefits of tracking your expenses:
1. You’ll be better at budgeting and saving
While there are several approaches to budgeting, they all benefit from having a detailed account of your expenses.
Proper budgeting can help you track how much money you have after meeting all monthly expenses, and begin saving accordingly.
You don’t have to start by saving and investing with huge amounts of money. With Acorns, you can start investing spare change in a diversified portfolio of ETFs, designed by experts.
Here’s how it works: Suppose you bought a donut for $2.49. Acorns will automatically round off that number to $3.00 and invest the 51¢ difference in your smart investment portfolio.
You can also open an Acorns Later account, which is specially designed to maximize your retirement savings. With an Acorns Silver plan, you can get a 1% match on new IRA contributions, while Acorns Gold offers a 3% match on new IRA contributions.
Sign up today and receive a $20 bonus investment.
2. Identify overspending
Tracking expenses can help you find areas where you could cut your spending and save for your goals. For example, in 2023, American households spent an average of $3,933 on dining out and $3,635 on entertainment, according to the U.S. Bureau of Labor Statistics (BLS).
If you’re looking for extra savings, these are areas where you could potentially cut your spending.
Another avenue where you might be overspending is insurance. Home insurance rates have skyrocketed in recent years. According to research published by the National Bureau of Economic Research (NBER), average home insurance premiums have jumped 33% between 2020 and 2023.
Shopping around for rates can be an excellent way to lower your insurance premiums. According to a ValuePenguin survey of over 2,000 consumers, 54% of homeowners who shopped around for their insurance reduced their bill, saving roughly $474 annually.
You can compare home insurance rates from lenders near you through BestMoney. Here’s how it works: enter some basic information about your house and finances, and BestMoney will compile a list of quotes for you to compare.
You can then set up a free consultation with no obligation to hire to see if they’re the right fit for you.
If you own a car, chances are car insurance payments have also been leaving a dent in your bank account. The median cost of full coverage car insurance rose by 26% year-over-year in 2024.
Shopping around for car insurance plans can help you cut this cost. With OfficialCarInsurance, you can compare rates offered by vetted lenders like Allstate, Progressive, and GEICO. The best part? This process is completely free and won’t impact your credit score.
All you have to do is enter some basic information about yourself and the vehicle you drive and get quotes from as low as $29 per month.
3. You’ll have a clearer picture of your retirement needs
A popular rule of thumb says you should expect to spend 80% of your pre-retirement annual income each year in retirement.
If you want to know if you’re saving enough for the future, you’ll need to know how much you’re spending and how much of your nest egg you’ll need to withdraw each month in retirement.
Consulting a vetted and trustworthy financial planner can help you figure out where you stand regarding your retirement goals. With WiserAdvisor, you can connect with pre-screened fiduciary financial advisors near you.
The process is simple: just enter some basic information about yourself, your financial situation, and your retirement goals, and WiserAdvisor will match you with 2-3 advisors registered with SEC or FINRA.
This matching process is completely free. You can also set up a free introductory meeting with your preferred advisor for free, with no obligation to hire.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
