Do you cringe when you open your monthly credit card statement? Do you look at your bank account balance at the end of the month and wonder where all your money went? You’re not alone. A 2013 study by the FINRA Investor Education Foundation found that 41% of people spend less than they earn, 36% spend as much as they earn, and 19% spend more than they earn.
If you’re living beyond your means (or close to it), here’s a daily practice to help you manage your spending: Write it down.
A significant portion of our uncontrolled spending comes from not tracking our expenditures. Below is a four-step plan with tools and strategies to make writing it down less of a chore and more of a tool for managing your spending. (See also: How to Do a One Month Spending Freeze)
1. Write It Down
Every time you spend money, write it down. At the end of each day, tally your spending by category (food, clothing, travel, etc.) and in total. This will provide you with a clear picture of your spending habits and identify the areas where you’re losing the most money.
2. How to Record Everything (and Keep It)
Choose a method that suits your lifestyle, whether high-tech or low-tech.
For some, simplicity is key. A small notebook dedicated to tracking expenses and easily portable can be a practical solution. If you prefer using your mobile phone, many apps can help you track your spending. I use TrackMySPEND, which is incredibly easy—just one click to enter your expense and its reason, and you’re done! Another good option is a basic Notepad app.
You Need a Budget (or YNAB for those in the know!) is a popular app for those who want to manage their spending within a set budget. This comprehensive budgeting system may be better suited for more experienced budgeters.
3. Cash, Credit, or Debit
Opinions vary on whether cash, debit cards, or credit cards are best for controlling spending. The right choice differs for everyone.
If your spending is dramatically out of control, a good strategy is to carry a set amount of cash each day and not exceed it.
If you often overspend but have the discipline to check yourself before making purchases, then credit or debit cards can serve as good alternatives. Cards are safer than cash, more convenient, and offer a digital overview of your spending through monthly statements. Most credit cards also allow users to set spending alerts and limits, helping keep their spending in check.
No matter which payment method you choose, you still need to record your expenses.
4. Daily Reflection
This is a crucial step in the process.
When reviewing your daily spending, take a moment to consider how satisfying those expenditures were.
The temporary high from what’s often called “retail therapy” fades quickly. If you had that money back, would you spend it differently? How would you feel if you could save your daily spending instead? Reflect on how hard you worked to earn that money. Does the satisfaction you gained from those purchases match the effort you put in to earn that money? Asking these questions can help you understand the true value of your finances.
Few people can naturally control their spending. For most of us, maintaining a budget is a habit we must consciously develop every day. Self-control is like a muscle; the more we exercise it, the stronger it becomes.
Do you have habits or tips to help you manage your spending? Please share them with the community in the comments below.
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