It is easy to resolve to budget better, to save money, or to get out of debt, but there is something that should be done before beginning work on these goals: Be mindful of your spending. This is an important step that is often overlooked, while many people give up on the other goals because they did not do this first.
How does one be mindful of their spending? By keeping track of every dime spent. Keep your receipts all in one place, and know how much you are spending when no receipt is given. Record everything each day for a few months, for a clear picture is where every penny is going. Keep track of cash spent, checks written, and purchases by debit and credit card, as well as when using PayPal and other services.
A good practice is to keep a small notebook and an envelope in your purse, or in the glove compartment of your vehicle. Use it only for keeping track of expenditures. At the top of each page, write the beginning and end dates of a one week period, until you have three months worth of weeks. Each day, record every purchase made on the appropriate page, then place the receipt in the envelope. At the end of each week, write the total spent. At the end of the three month period, also record the grand total. Be sure to keep all receipts, as you will need to be able to examine them later.
At this point, you know how much you have spent over the three month period. Are you surprised? Do you think you spent too much?
Now, take a highlighter and highlight all necessary expenditures. These include:
- Rent or Mortgage
What is left? What do you notice about your optional spending habits? Do you eat out a lot, or have food delivered at least once a week? Do you get sodas or food from vending machines throughout the week?
Now take a look at your receipts. Are there many snack type purchases? Those of easy, not necessarily healthy, foods to prepare when you are feeling rushed? Did you really need two more pairs of shoes? Take a look at each receipt, and at each category of expenditures. Is it really necessary to buy three different types of shampoo each month, when one will do?
At this point, if it is decided you are spending more than desired, you’ll want to create a budget and look for ways to cut back on expenses. But that is another goal. You are now prepared to work on other financial goals if you have set them. If you haven’t, should you?