Up until not too long ago I would have said ‘Yeah I know where my money goes’ then I’d wonder why I had barely enough money for gas three or four days before payday. Did I really know where my money went? No, I knew where my bill payments went and that was quite true since I paid those shortly after getting my pay. It’s very easy to spend money when you have it, most people happily spend their money from pay to pay not realizing just how much they spend on consumer good. Take today for example I’m sharing a bottle of wine with my fiancé, two days from now I won’t know that this happened because it’s a bottle of wine with dinner that will be gone and in the recycling bin before I know it. This is true of so many things: your morning coffee or a pack of smokes, before you know it you’ve chewed through all the money in your account and you’re hitting the credit card and accumulating debt.
This brings up a very valid question: How do you know where your money goes? What I’ve been doing (off and on) over the past year is actually keeping detailed notes of what I’ve been spending my money on. Most people would laugh to the detail that I go because I keep track of every penny and dime, but the sad truth is if you don’t go to this detail for about a month how will you know what you spend your money on? If you were to buy two coffees for $1.50 each day for a month you’d be down $90. Now this isn’t a big deal for most people but you add up 4 or 5 things like this and all of a sudden you realize why you don’t have any money just before pay time.
For me I use this as an exercise to help keep track of my money and to help me budget. If I’m spending more than I should be on something like food I can alter what I buy and if I go out but if I’m still consistently over then maybe I’m just not budgeting enough for food. It’s an additional tool to help get your finances in order (at least for me). The other reason I like doing this it helps me cut down on spending money on things that I really don’t need to buy (for those of you who are coffee lovers it’s the 2nd cup of coffee when you really didn’t need one but wanted a break – $1.50 a day for a month is about $45).
Before anyone makes a comment that this is a burden to do something like this, once you get into the habit of doing it, it really isn’t difficult (just keeping your recipts is often enough). And secondly the benefit that it will give you to budgeting is immense. Although I still spend way too much money I intend to keep doing this to know where my money is going.