My first goal in my quest to pay off my student loan debt is to track every penny I spend in the month of January. It’s tedious. It’s sometimes hard to remember. And it’s hard to wait a whole month before really setting up the budget. But tracking expenses is important, when it comes to debt repayment.

Expense Tracking Shows You Why You’re in Debt

If you’re in debt, most of the time it’s because you’ve overspent. Exceptions would be if you only have mortgage or student loan debt. But most Americans have credit card debt. In fact, the average amount of credit card debt for each household in the U.S. is $9,797.38. That’s a lot of debt.

Without tracking your expenses, it’s hard to know where you’re overspending. How many times have you walked into Target and spent $100, only to forget what you bought a week later? I know I’ve done that more times than I can count!

But if you separate your Target receipt into categories and write down what you’ve spent in each category, after a month you will have a pretty good idea of where your money is going. Maybe you have a tendency to pick up a 20 oz. bottle of soda, while you’re in the checkout line. At $1.50 a bottle, that can add up quickly. Maybe you’re tempted by cute clothing that’s on sale. Tracking your expenses will show you how much you’re really spending on clothing in a month. It might be more than you think!

And at the end of the month, you can compare your tracked expenses to your actual income. When you have the numbers in front of you, there will be no denying it, if you’ve spent more than you earned.

Expense Tracking Shows You How to Get Out of Debt

The flip side to seeing why you’re in debt is knowing how to get out. And expense tracking can help you do that too. Tracking your expenses will show you how much you spent on necessary things…and how much you spent on unnecessary things. Looking at those unnecessary expenses will show you where you can cut your budget, so you have the money available to pay off debt.

What are you spending on clothing? Eating out? Entertainment? Can you cut the grocery budget by shopping at another store? Couponing? Cooking more from scratch?

Looking at your recorded expenses will point out areas of excess spending or budget leaks. By reigning in the spending and plugging the leaks, you’ve taken the first step towards getting out of debt. Know what you earn. Know what you spend. And make sure what you spend is less than what you earn.