If you’re anything like me, you are constantly asking yourself, “Where in the world does all my money go?” Having thoughts somewhere along the lines of, “I swear I had more money than this in my account. What in the world did I spend it on?” Have you ever been there? Could have sworn you had a few hundred dollars in your account, but by the end of the week or month you’re wondering where the heck it all went.
I used to constantly wonder where all my money disappeared to. Spending $5 here and $10 there, not thinking much of it. But what I didn’t account for were those little purchases adding up. And add up they did. As you well know, larger purchases are easy to keep track of. They hurt the moment you make them. But when you make a whole bunch of little purchases (those ones under $20), you really don’t notice the money going out ‘til it’s too late and the damage has already been done. Think about it… How many of us spend $5/day, or more, on just lunch? Well let’s do the math. If you spend $5/day on lunch, 5x per week, you end up spending $25/wk. or $100/mo. on just lunch. Do you know how many groceries you can buy at Aldi or Walmart for that amount? A lot.
But how do you rectify this? Well the simple solution is to create a budget and track your spending. You have to literally and figuratively “plug the hole” in your pocket. With this blog, I’ll walk you step by step through the process of creating a simple budget you can stick to. The methods I’m going to share with you are the same methods I used to help myself, my friends, and my family to get on track. In fact, they’re the same methods I use to this day. And since this has been tried and tested over a number of years, I’m confident we can recreate this process with you. So let’s get started…
Step 1: Identify your spending habits.
It’s hard to start a budget without knowing exactly how much money you’re spending on an average, weekly basis. Especially if you don’t know exactly what you’re spending your money on. No more opening up your bank account and saying, “man what in the world did I do with my money?” So the first thing I’d like for you to do is track your spending for 3 whole weeks. Why 3 weeks? Because that’s how long it takes to form a habit. And in order for this to work, we need some good foundational habits at the helm. Now you can track your spending the old school way and buy a pen and pad from your local dollar store. Or you can do this the more convenient way and download a budget or spending tracker app to your smartphone. My personal favorite is the spending tracker app by M.H. Riley. I’ve been using it the past few years and absolutely love it. Click here for some detailed instructions (including screenshots) on how to set this app up step by step.
Spending Tracker App Setup (Recap):
1) Once the app is downloaded, you’ll want to make sure your time period is set to weekly and your start day is Monday.
2) Next, you want to hit +Income to input all of the funds available to you in both your checking account and in cash. Don’t include your savings unless you tap into it regularly. If you never touch your savings, don’t include it in the count.
3) Every time you make a purchase, whether using cash or card, open up the app and hit +Expense to account for it. No matter how big or small the purchase. Even if you only spend a quarter, track it. Side Note: the app allows you to categorize your expenses using their preset categories or by typing in your own. Labeling the expense will be very important down the line, so be sure to do this accurately. This will eventually aid you in identifying those problem areas where you can reduce your spending in the future. I plan to address this topic, at length, in a later article. For now, just note that the category is as important as the dollar amount.
4) During these first 3 weeks, budget mode will not be activated. So any time you receive additional income you’ll need to manually input it. To do this, you simply need to hit +Income (like you did above) and it will be added to your budget. Also, during this period, your app and your bank account should pretty much mirror each other.
I'm an attorney, blogger, entrepreneur, movie buff, video game geek, and athlete all wrapped in one. But more importantly, I'm a personal finance enthusiast who wants nothing more than to see you debt free and stress free.
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