Do you have any idea as to where all the money you intended to save for the month has gone? If the answer is no, then it’s time you sat up and pay attention.
It’s easy to fool yourself to the effect you have a perfect handle on your spending. However, month-on-month, you live paycheck to paycheck even with your very reasonable salary!
About 78% of full-time workers are living paycheck to paycheck, according to a recent poll, even while earning a decent salary. However, since they do not know what exactly they are spending on, most people end up throwing away money that could have been saved. To make matters worse, some even rack up credit card debts just to fund the lifestyle they have become used to.
Wake up, buddy.
There’s not going to be any improvement in your financial situation until you start closely monitoring what you spend money on. Without doing so, you may soon find yourself boxed into an unpleasant financial corner.
Just like watching what you eat, keeping track of your spending is never easy.
However, you realize how tracking your spending could be good for your financial health. Extending the food analogy, you notice how the fat seem to lose themselves once you start (and continue) counting calories? At first, it may not be easy, but once you get into the habit of measuring and recording all you consume, your weight loss journey becomes almost effortless.
The same thing happens when you finally decide to track your spending or where your cash goes.
Tracking your spending help you develop a budget. Moreover, after you have cut a budget, tracking your spending will help you to compare your expenses against your budget to see how you measure up-and make necessary adjustments.
You can have a Masters degree in making money, but you will still wind up broke if you have a PhD in spending it. – Orrin Woodward
Lest look at some of the true, tried and tested ways to ease the difficulties of personal expense tracking.
Quit spending cash
This might not be easy or even preferable for everyone, but it works. When you cease using cash to pay for things, all your expenses in a given period can be easily or even automatically recorded. This means tracking them becomes a breeze.
Every debit card, credit card, check, automatic bank withdrawal, and PayPal transaction is recorded electronically and automatically too.
Unfortunately, we can’t say the same for cash payments. It requires conscious and deliberate effort to record them manually and frankly; this might not be in the interest of most people given our busy lifestyles.
However, with electronically recorded transactions, all you need do is to review weekly and transfer the records to a special worksheet.
There are even apps that will move the record to a single location for you.
Ok, while this makes so much sense; there is a little problem. Some people tend to spend just a bit more when they swipe cards. Having to bring out hard green dollar bills and pay for things is hard for them thus making them spend less.
If you happen to fall into this cash-averse category, then, by all means, go ahead and use cash. Just try to remember to record your cash transactions.
Start using an App
When it comes to tracking your spending, there are many personal finance apps which are quite useful. Powered by the latest developments in Artificial intelligence, apps are getting better at managing your money, making investment decisions and helping you to stick to a budget.
Here are some of the best personal finance Apps for knowing where your money disappears too:
- Mint: It’s a free app developed by Intuit Inc, makers of TurboTax and QuickBooks. It’s an excellent tool for tracking your expenses, creating a budget and making wise decisions about your money. And most impressively, Mint is completely free.It links up to all your accounts and your recurring bills and saves you the hassles of logging into multiple platforms. The app alerts you when you have bills that are due, how much you owe and what you can pay. The payment reminders nicely help you avoid paying late fees. Mint also features a free credit score and can dispense advice based on your spending habits to help you manage your budget better. If you want to be updated real-time as to where your money is going, this is the best app to go.
- Wally: It’s another free great app that is so easy to use. Wally conveniently lets you take photos of your receipts and logs them as expenses to free you from the stress of manually entering your expense details at the end of your long day.
If you love a streamlined and stress-free way to follow your money, that doesn’t involve typing on your tiny error-prone smartphone keyboards; Wally is the App.
Try the envelope method
Far removed from high technology, this method is old-fashioned, simple and surprisingly effective. Earlier, we advised against using cash; however, if manual tracking is your thing, this budgeting method can help you save lots of money as well as track your spending.
Simply decide on the expenses to cover with cash, and label envelopes accordingly for each expense category. For instance, you can have transportation, grocery, and eating out envelopes. Then withdraw cash from your back and fill each envelope as budgeted.
As you take cash from an envelope to cover an expense, please make sure to write it down somewhere, preferably on the body of the envelope. You will find that you will now know how much you have spent on a particular category at each point in time.
If you manage to finish the cash in an envelope before the budgeting period has elapsed, you either have a choice of forgoing spending in that category or seek cheaper alternatives (you can create a separate envelope marked ‘miscellaneous’ for this over-the budget-spending).
This will help you make some significant savings as well as track your spending.
For example, if you planned to spend only $200 for eating out each month, and the eating-out envelope empties within 2 weeks, you will have to simply make your own meals at home till the next month.
You’ll be forced to become aware of how wasteful some of your spendings can actually be and hopefully adjust for the better.
Track your spending by using a separate bank account for different spending categories
This is another simple method and also a variation of the envelope method. Instead of using an envelope, you can open different accounts with your bank for each of the spending categories.
The first step is to compile your expenses into a few broad categories. When the accounts have been opened for each category, you should instruct your bank to set-up a standing order to automatically transfer the budgeted amounts for each account at a particular time of the month (when you get paid).
You can also set-up a direct debit for each of your bills. This way, you are relaxed knowing all your essential expenses have been taken care of and the money in the other accounts will take care of other not-so-vital needs.
Regardless of the tracking method, you choose to adopt; it’s efficiency, depends totally on your discipline. You can only properly track your spending, save and build a solid financial foundation if and when you decide to do so.