'A fool and his money are soon parted', is a saying that dates back to 16th Century England, and is still true today. Spending money is easy. Too easy. Temptation is everywhere, and we think we will be happy once we have the all the material things we want. But stop for a moment – would you rather have things or financial freedom?
Short term pleasure against long-term gain is a hard battle to fight. One way to do this successfully is to start to track your spending. Tracking your spending will give you an accurate idea of where your money is actually going, what is really important to you and where you might be able to make savings. Very few of us use cash for all our purchases these days, in fact, it is almost impossible, so unless you are logging on to your bank account every day, it can be tough to keep track of where your money is going.
There are loads of brilliant apps to help you track your spending accurately, but you don’t need to download a complicated app to make a start to track your spending. For the first month, why not just use an ordinary notebook and write down EVERYTHING you spend in a day? Lots of people find that the habit of physically writing down every penny is a powerful way to get on top of out of control spending habits. Or, if a notebook feels like too much, just make a note of it on your phone.
Here is how to do it right:
- Find a notebook that you like to use and is small enough to carry around with you.
- Or use notes on your phone.
- Use a fresh page for every day and write the date at the top of the page.
- Write down everything you spend. Bought a coffee on the way to work? Write it down.
- Online shopping at lunchtime? Write it down. Magazine for the commute home? Write it down.
Recent studies have shown that it is the ‘extras’ that really trip us up. All the small things that add up to a lot when we are not looking can throw our budget out the window. One American study suggested that the average daily spend on extras can amount to a whopping $87 per day. Over a year that amounts to $31, 755!
Starting to track these small expenditures, can really help us to get back in control. Although there are some amazing spending tracker and budgeting apps (and we will be reviewing some of the best of these later), they can take time to set up. Try and find a method that can be used immediately, like your phone notes or an actual notebook.
However, the magic only happens if you use it every day and write down everything you spend. At the end of the day (or at the end of the week) you can add everything up and split it into broad categories like household, food, bills and, of course, extras.
Using a simple system is a brilliant way of starting to understand your spending habits and getting you back in control of your finances. Maybe next month you will be ready to download an app!