Do you cringe when you review your monthly credit card statement? Do you examine your bank account at the end of the month and wonder where all your money disappeared? You’re not alone. A 2013 study by the FINRA Investor Education Foundation revealed that 41% of individuals spend less than they earn, 36% spend exactly what they earn, and 19% spend more than they earn.
If you find yourself living beyond or close to your means, here’s a daily practice to help you regain control over your spending: Write it down.
A significant portion of uncontrollable spending stems from the lack of tracking expenditures. Below is a four-step plan, complete with tools and strategies, to make tracking your spending easier and more beneficial. (See also: How to Do a One Month Spending Freeze)
1. Write It Down
Each time you spend money, jot it down. At the end of each day, categorize your spending (such as food, clothing, travel, and transportation) and calculate the total. This practice will give you a comprehensive view of your spending and highlight the categories that drain your finances the most.
2. How to Get It All Down (and Keep It)
Choose a method that suits your lifestyle, whether you lean towards high-tech or low-tech solutions.
Some individuals prefer simple, tangible methods. A small notebook dedicated to tracking spending, easily fitted into your pocket or purse, can be a useful tool. For those who rely on their mobile devices, there are numerous apps designed to track expenses. I use TrackMySPEND, which is incredibly user-friendly — just one click to enter your expense and the reason for it. Another practical choice is a basic Notepad app.
You Need a Budget (YNAB) is a popular app for those who enjoy budgeting within set limits. It embodies a whole budgeting philosophy, making it more suitable for advanced spenders.
3. Cash Versus Credit Versus Debit
Opinions vary on whether cash, debit cards, or credit cards are the best methods for controlling spending. The right choice differs for everyone.
If your spending is uncontrollably excessive, carrying a designated cash amount daily and not exceeding that limit may be the best approach.
However, if you find yourself spending more than you’d prefer but can practice self-discipline before making purchases, then a credit or debit card may work well for you. Cards are safer than cash, often more convenient, and provide excellent digital visibility into your spending through monthly statements. Many credit cards offer spending alerts and limits to help you stay on track.
No matter the payment method you adopt, it’s crucial to document your expenditures.
4. Daily Reflection
This is the most critical step in the process.
As you review your daily spending, take a moment to evaluate how much satisfaction you derived from those purchases.
The momentary high often associated with “retail therapy” is fleeting. If you could have that money back, would you choose to spend it differently? How would you feel if you could channel your daily spending into savings? Reflect on how hard you worked to earn that money. Does the pleasure from your spending reflect the effort required to earn it? Posing these questions can help you genuinely perceive and appreciate the value of money.
Very few individuals can naturally control their spending. For the vast majority, curtailing expenses is a habit that must be cultivated daily. Self-control, in every context, is a muscle — the more we exercise it, the stronger it becomes.
Do you have consistent habits or tips that assist you in managing your spending? Please share them with the community in the comments section below.
