It is easy to spend without thinking, from an afternoon pick me up latte to an impulse splurge buying a magazine at a grocery store.
In the moment, these little purchases seem like no big deal - they're only a couple dollars, right? However, in the long run, they can end up costing a significant chunk of change.
For that reason, it's important to keep track of your spending habits, both big and small. That way, you can notice trends in your spending, and then figure out ways to cut down costs.
Here's a few easy steps that you can use to record and learn from your spending habits:
Keep a Journal
Write down everything you spend money on, even if it's as tiny as some gum. It can be nice to have a small notebook that you can keep in your purse or pocket, so it's easy to access.
Since everyone's different, there's not one way to do this. Other options are keeping an updated document on your computer/phone or creating a voice memo. Find what's best for you; it may even be a mix of things that you compile together later.
When you record information, include what you bought, the price, and the approximate time it was purchased. This data can be extremely helpful.
Keep Track at Least Once a Day
While ideally, it would be a good idea to make a note about spending habits right after you've made a purchase, sometimes that's not possible. In those cases, strive to get everything recorded by at least the end of the day. This gives you a bit of flexibility.
Maintain Your Tracking for A Couple of Weeks
Diligently maintain your recording habits for a couple of weeks. This amount of time gives you a solid idea of your spending habits.
No matter what happens, be honest and don't judge yourself. That's the only way you can accurately assess where you are - and where your money goes.
Evaluate, Evaluate, Evaluate
Here comes the meat of the process. Once you have a couple weeks' of information recorded, you can begin to look at it. Try to find trends.
For example, is there a time of day where you spend more money? Beyond your needs like rent, where does your discretionary income go toward? Movie theater tickets, eating out, clothing sprees?
It's important to reflect about what you want. For example, if you prioritize buying new clothes on a regular basis, that's okay. After all, it is your money.
However, it becomes an issue when, say, money goes toward a daily to-go coffee when you'd rather have a larger purchase down the road, like a fancy electronic device. So, when you look at your spending habits, notice what you can cut out or swap.
Some easy swaps/changes include:
Repeat and Re-Evaluate on a Regular Basis
The thing about spending habits is that they can change. So, every once and awhile, start recording your spending habits again. See what you find, and adjust accordingly. Happy spending (and tracking!).
Ken is a finance expert with a degree in finance. He loves pizza, especially Chicago deep-dish from Lou Malnati's!