After my post, “What’s Your Spending Fear,” several people emailed me and said that their biggest spending issue was that they had no idea how or where they were spending their money. Other than having a basic idea of where they shopped, their money seemed to fly out of their wallets.
This is especially easy to do in today’s online/virtual shopping cart world. It’s so easy to “click” your way to buying things you either don’t need or don’t even want (four boxes of Pop-Tarts, anyone?).
The simplest way to figure out where your money is going is by tracking your spending. Especially with online purchases, where you may be buying items one at a time, it can be easy to lose track of your purchases. For example, throughout each month, I add items to my Amazon Subscribe & Save account. At the end of the month, Amazon charges me for each individual item and then ships everything to my doorstep. I check my order to make sure that I received everything, but then I just categorize every transaction in my budget as “groceries” without really paying attention to the actual items (lip gloss doesn’t count as groceries, no matter how much I think I need it).
I’ve gotten lazy with my budget, and it’s starting to show!
How to track your “cash envelope” spending
Many people use the “cash envelope” budgeting system. Each month, they put a certain amount of money into each envelope, such as $400 in a “groceries” envelope, $100 in a “fuel/transportation” envelope, etc. While this is a great way to make sure that you aren’t overspending on your budget, it’s still not forcing you to track your spending. You could borrow from another envelope if you overspend on groceries, and how do you ensure that everything you buy is “groceries?” For example, not every item in my Subscribe & Save order is a “grocery” item.
If you use the cash envelope system, you need to start saving your receipts and tracking your spending. Review your receipts to make sure that you didn’t pick up magazines in the checkout line as part of your “grocery budget.” Line by line, make sure that you’re spending your money the way that you need to (or even want to). Let’s make your budget (and spending) work for you!
How to track your credit card purchases
If you use a credit card for all your purchases, you’re probably already “tracking your spending.” You can review your statement each month to see where you spent your money. Even so, do you really know how you’re spending your money? Is everything that you buy on Amazon groceries? Is it even necessary?
Just like with the “cash envelope” system, make sure that you’re reviewing your expenses. Take some time to compare your credit card statements to your actual receipts. Do they match? Do the transactions line up with the category on your statement, or did you buy lip gloss and pass it off as groceries?
As we’re getting closer to the holiday season, try to start tracking your spending. In January, we’ll do a series on creating a simple but effective budget that works for you. Even if you already have a budget, still take the time to think about how (and where) you’re spending your money. Is it really on groceries? If not, are you buying things that you need, or just things that catch your eye as you pass through the store (or click as you see them online)?