Track your spending

Let's talk about money today, specifically how we spend our money. Most of us know how much money we make in a month but very few of us know exactly how much we spend, or on what. When I first started taking control of my money and had to make every penny stretch as much as I could, I found that tracking my money was the best way to discover two important things:

1. what I was spending my money on;
2. what my non-essential spending was.

Non-essential spending is often the key to paying off debt. It's that money we all spend on magazines, coffee, movies, a packet of chocolate biscuits, iTunes, takeaway food, convenience food, soft drinks/soda and bottles of water. Most of us know that spending on these things is wasted money, but we still do it, "just this time". If you can identify the money you spend on those non-essential things and add up the money spent over a month, I'm sure you'll be surprised. And if you can harness that money and put it towards debt repayment, or even to buy the groceries you need this month, then it's a step in the right direction.

How to track your spending

Every time you go out - every . time - record exactly what you spend and on what. You can do that in a number of ways:

1. Take a small notebook and pen with you and write it down as you spend.
2. Collect every receipt and when you come home, add them up and record the totals.
3. Use a smartphone app. The one for Australians on the government's Moneysmart website is very good. You can download it here. The data you enter into your phone can later be transferred to an Excel spreadsheet. It also allows you to set your limit and will track as you go and show you where you are in relation to your limit. You can download My Spending for Android phones here or Expense Tracker for iPhone and iPad here.

Changing behaviours is rarely about the big things. The big ticket items stand out and we notice them. They make us stop and think before we buy. It's the small things that do the real damage. Usually they  are items you want but don't need. We buy them because they're relatively cheap but when you track what you spend over a month and then add it up, you'll be surprised at just how much you spent on all those small things. 

When you get to the end of a month's tracking, you'll have a much clearer idea of what you're spending your money on. If you can stop that spending, your money can go towards your budgeting requirements. If you've never done this, it's worth doing. Otherwise you won't know your spending habits or how much all those small things are costing you. One thing is for sure, they cost you a lot more than you actually spend.

When you have at least a month's tracking, you have the two figures you need to make up your budget: how much your income is and an accurate summary of your spending. Then you go to the next step. Working out a budget you can live with, while paying off debt in an organised way, or building your savings account. That, my friends, will be our next post.

Please share your experience of tracking your spending and how you did it.