“Where did all my money go?” “How did I go through my paycheck already?” Often times, we find ourselves staring at our bank account balance wide-eyed wondering what we spent our money on. Wondering where our money went is often a warning sign letting us know that we need to regain control of our financial situation. So how do we figure out where our money is going?
1. Pick A Budget Tracking Tool
The choice is yours! Tracking where money is spent can be as simple or as detailed as you would like it to be. The key is that it is written down in a place where you can readily see where you are spending your money. Keeping track of things in your head is what led you to wonder where your money went to begin with. Seeing where money is disappearing to is quite shocking.
The simplest thing to do is to carry a little notebook and write down transactions as they are done. When carrying around a notebook is not an option, be sure to save all of your receipts throughout the day. Once home, be sure to record them right away.
If you prefer to use the computer, there are plenty of websites available to track spending online. A simple Excel spreadsheet even does the trick.
2. Start Tracking Your Daily Expenses
Begin by listing your regular monthly expenditures. For the rest of the month, continue to write down every transaction that you complete. Whatever method you prefer, be sure to at least include: the date, amount, and a category. Categories can include “transportation,” “food,” “entertainment,” etc. Other details to include can be the method of payment, the store, and a general idea of the item(s) purchased.
3. Evaluate Your Monthly Spending
Now that you have been writing down your expenses for the past month, it is time to find out where the money “went.” Begin by totaling up each spending category. This step is usually where the “ah-ha!” moment comes. You will be able to see how much was spent on eating out or how much was spent on clothing. Depending on how detailed you were with your tracking method, you can even notice trends in your spending habits that you weren’t aware of. After looking at the numbers, you’ll be able to identify areas to cut back on spending can now be identified. Maybe that means eating out less. Maybe it means making some larger changes like cutting back on the cable bill
4. Take Action To Cut Overspending
Knowing where your money has been going and what areas of spending can be adjusted, gives you the power to regain financial control! The next step is to create a spending plan. Relax! You now have the hard part out of the way! The spending plan simply tells your money where to go at the beginning of the month rather than waiting to see where it went at the end of the month.
Tracking expenses can seem very scary when we actually have to face on paper what we do with our money. Our money should not be in control of how we feel or what we do. We should be able to know exactly what amount is going where so we can live a little more stress-free.
Image from 401kcalculator.org