Track Spending Habits to Improve Your Finances

January 17, 2008 | Author: Rob | Filed under: Money Matters

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The best way to make a decision is to get as many facts as you can and make a rational non biased analysis of the situation before deciding. Why is it that when it comes to your financial matters which are arguably one of the most important facets of life you just wing it? I say it’s important because let’s face it; we need money to live. We often sacrifice 1/3 of our day 5 days a week to work; for money; to support ourselves.

We’ve all heard of budgeting, cash flow and other buzz words but have you ever tracked your financial habits? I mean really tracked them down to the last bill. When I was in University I had a computer program and I would track every single dollar I spent unless it was change. Change didn’t matter maybe it should of but I didn’t’ bother keeping track of it. Meaning if I spent 18$ on food and 2$ in change I’d record it as 18$ in groceries and 2$ RIC(rest in change). That way I can still monitor how much change I had during the month but I didn’t’ need to know where it went.

When you track your financial habits it’s like doing keyword research. What you think is reality and what reality is are often MUCH different. Give me ANY keyword and I’m sure I can come up with several possible search terms that I THINK people will use. Now when I do the research I’m always shocked that some of the BEST terms that oddly LOT’S of people are typing is something that never even crossed my mind. Same goes for your financial habits; what you think you spend and how much you actually do spend is often very different from reality.

When I was in University at one point I started hanging out with a crowd that went to different bars; high end ones where spending 100-200$ a night was very easy compared to your typical university pubs where you can get sloshed (if you wanted to) for 30-50$. I labeled all activities independently and sure enough after 2 months when looking at the pie charts I couldn’t get over how much I had spent at this new place. I quickly cut it out of my life. If I hadn’t been recording I would of probably just kept spending and justifying it when in reality it was one of the largest portions of my pie…

Where is your money going? Do you really know where every dollar you earned goes? If you want to be good with money you have to get to know money; especially YOUR money. The best way is to track your expenses for as long as possible. As a test though you can run it for 1 month and then reflect. I bet you’ll be shocked at where and when most of your money went. Remember spending 5$ on coffee and a sandwich isn’t a lot but multiply that times 30 and you’re looking at 150$ a month. $150 a month isn’t chump change.

Start tracking your financial life and in the process start cutting out / patching unneeded “leaks” in your financial ship. The funny thing is when closing up these leaks if you track your history you’ll probably find that somewhere you’re getting hit with a canon ball and that one expense alone ads up to more then all your leaks. Currently I run a tight ship; I patched up a few canon ball holes and like everyone am always trying to fix small leaks. However by examining my spending habits I don’t mind having a few leaks as I’ve successfully closed a few canon ball holes. It’s funny how you can worry and stress over the leaks while totally ignoring one that takes on more water then all your other leaks combined.

I’m digressing but back to the point; if you want to improve your financial life; start tracking it and identifying areas where you can cut back or areas where you should spend less. Also remember if you are having trouble allocating all the pieces in your current pie; don’t fret start earning more and make the cake bigger!

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