The first – and most important – step in money management is to know where your money is going! Sure, it’s easy to list off things like rent/mortgage, car payments, utilities and groceries but what about after that? Where are all of those nickel and dimes going? Chances are you don’t know.
There are many different ways to track your spending. The cheapest way is to record every penny spent using a spreadsheet software or good old fashion pencil and paper. The downside to that is it is time consuming, prone to error and is difficult to sort by category (which will be important to see where that money is going).
If you’re willing to spend a couple of bucks (or use trial periods) there are several programs out there that will tie into your bank account and retrieve all of those transactions for you. Of course this only works if you use your bank card for all of your purchases. This can be a little time consuming if you don’t maintain your account daily/weekly and save all your transactions for the end of the month. But if you stay on top of it this can be the most effective way to see where all that hard earned money is going.
I suggest tracking your spending for a minimum of one month but two or three months will give you a bigger picture. Don’t forget to watch things like car maintenance, yearly memberships/subscriptions, home improvements/maintenance and summer vacations. Many people forget to look at how much they spend in those areas and in turn, forget to budget for them going forward.
Get started! The sooner you find out where you’ve been the sooner you can figure out where you’re going!
If you’re already tracking your spending drop a comment and let us know what method you use.
Tags: Budget, money, money management, Saving, spending
