Reasons to track expenses in your new country
No…. this is not a post about budgeting. Budgets, although useful, can be restrictive.
Keeping track of expenses, is simply a way to fully understand where your money is going. It allows you to identify possible efficiencies, improvements, and pitfalls. This is especially true for the first few months in a new country, when expenses can be rather volatile.
In a new country, the currency is different. Things that are considered expensive or cheap can be very different. Sales taxes are different. The expenses you need to be aware of can be different.
After tracking expenses for a few months, the awareness gained can better assist you in making future financial decisions and goals. It can help alleviate financial stress and subsequently allows you to settle in faster in your new country.
Benefits of tracking expenses in a new country:
You will spot potential improvement areas
Over time, you will spot areas that can allow you to be more efficient in your spending. It’s gratifying to see month-on-month improvements as you develop new habits and learn where to shop. You will learn what your specific pitfalls are. Addressing the inefficiencies identified can help you save more towards whichever financial goal takes priority for your circumstances. This can be a better travel fund, topping up your emergency fund, allocating funds towards retirement, sending money home, saving for a property deposit etc etc.
Getting familiar with your new currency and building awareness
It’s a new currency. If you happened to move to a country with a large value difference, the frequent habit of converting and the related mental gymnastics can distort your view on what is cheap or expensive. Tracking expenses will help you get familiar with costs specific to that particular country. You will have a better idea of your average spending on groceries, utilities, luxuries, and other expenses.
A sense of control and reduced stress
The first few months in any new country can be volatile. There will be unexpected expenses and once-off set-up costs. Tracking your expenses helps maintain a sense of control. You know where you stand and as a result, can better plan for where you want or need to go. Seeing improvements over time also builds self-esteem and self-confidence.
It can possibly help with tax
Some of the information could be helpful at tax time. There might be expenses that are tax-deductible, or it can help avoid penalties. For example, tracking contributions to a TFSA or Retirement account can help prevent accidental overcontribution. In some countries, a portion of the expenses related to setting up a home office may be deductible etc.
How to track expenses
There are multiple apps that deal with just that and offer the benefit of an automated approach. Or, for the more traditional, a simple pen and paper approach will suffice. Personally, my preferred approach is a simple no-fuss Excel spreadsheet. But, being an accountant by profession, I enjoy tinkering with excel for fun. Once size does not need to fit all.
Find a way that works for you. Chances are, if keeping track of your expenses becomes a chore, it will fall by the wayside, and you likely won’t stick to it.