The first step to getting your finances on track is to know where your money is going. But that isn’t always obvious: you may have a good handle on your monthly bills, but what about your daily expenses? You may be surprised by how much money you spend on small items—like food and transportation—when you add up your out-of-pocket costs. You may not realize how much money you’re spending on coffee, food, or clothes until you track the data. Similarly, tracking your spending habits helps you discover how much money you’re spending – which might be significantly different from the amount you think you’re spending.
Tracking your spending is the only way to find out how much you’re spending on non-essentials – things like entertainment, dining, sporting events, hobbies, and excess personal care. While $20 here and $50 there might not seem like a lot at the time, those small expenditures can add up to a world of hurt over the weeks and months.
- Create categories that align with your most obvious spending categories.
- List your regular monthly bills + Track your out-of-pocket spending for a month
- Review the numbers
- Come up with strategies to eliminate extra spending habits
- Create a plan and stick to it
- All leftover money can be used to put into savings
If you want to change your spending habits once and for all, use the information you’ve gathered to create a new budget that aligns with your savings goal.
Find ways to give yourself some wiggle room. A small cup of coffee with your friend on a Wednesday morning won’t hurt your budget, but doing this every day will. Be aware of what you’re spending and stick to your new budget.