Where Is My Money Going?

It’s a question we’ve all asked ourselves at some point - hard one to avoid. We sit down at the kitchen table, sort through all the bills, and wonder - where is my money going? What am I spending it on? How can I only have this much left over at the end of each month? Where is all my money?

It’s a difficult reality to face that perhaps some of our spending habits have gotten a little out of control. What’s even more difficult about it is that sometimes it can be the spending habits that float under the radar - the ones we don’t notice on a daily basis - that can really end up costing us big in a long run.

I personally know what a challenge it can be to keep track of all the money we spend and earn in a month and that sometimes it’s easy to let little purchases slip by without us taking any really notice but it’s these little things we go out and buy that make up a huge chunk of where our money goes to each month.

So if you continually find yourself pouring over your statements at the end of each month, trying to figure out where your money is going then the best solution for you is a money diet.

That’s right, a money diet. Now a money diet doesn’t mean that you completely stop spending money, you’ve got to keep eating after all, but it does mean that you start paying careful attention to the way you’re spending money. Because the key to finding out where all your money is going is to watch where it flows, in and out.

So for thirty days you are on a money diet. That means that every time you make a purchase, now matter how big or small, whether it’s coffee or a car payment, you keep track of it. The way you do this is to keep a small notebook or journal with you at all times and every time you spend any amount of money, even if it’s just putting change in a tip jar, you get out your little journal and write down exactly how much was spent and on what. It’s also a good idea to put the time and date that the purchase was made.

Now this may seem like a lot of work at first but remember, you’re only doing it for thirty days, after a couple of days it will become easy and like second nature to you, and you’re doing to create a better financial life for yourself - so no slacking off!

This also has the effect of making you a great deal more aware of your spending habits. When you’re forced to write down exactly how much you’re spending on something it puts it right up front and center in your mind. There’s also no “pretending” you didn’t buy something. You can’t “forget” about random purchases you’ve made, nor can you brush them off nonchalantly - you have to write down exactly what it was and how much it costed.

If you want to take this thirty day trial to the next level it’s a good idea to also write down why it was you bought a certain thing. For example if you’re buying a coffee every morning because you’re too rushed to make your own then that shines a light on your organization and preparedness. If you’re going out to lunch every day and eating fast food then it can be pretty obvious what the state of your health is looking like. It can be a pretty scary thing to take a look at what your purchases say about you but it can also be an invaluable tool to help you take a good hard look at your finances as well as other area of your life - because there isn’t a single aspect of your life that isn’t affected or influenced by money.

Once you’re aware of the areas that you are spending (or wasting) large amounts of money in you can identify any serious money problems such as compulsive spending, or maybe even “emotional shopping” and learn to recognize the signs of those purchases and hopefully put a stop to them.

At the end of the thirty days take some time to sit down and go over your logs of all your spending and look for common patterns. Look for times of day when you’re spending more money compared to others. Are there certain days of the week or times of the month that you’re spending goes up a great deal? Pay attention to where these fluctuations happen in your bank account. It’s important to differentiate from spending like car payments and rent and that sort of thing and big shopping sprees or random purchases.

Once you’ve been able to see the patterns of what times you’re spending the most amount of money it’s time to take a good look at what you’re spending all that money on. There are many programs that are available to do this kind of work but you can do it by hand as well if you think it will serve you better. Just gather all your logs and make a few categories, things like bills, gas, clothes, food, entertainment, etc. Then go through each day of your log and put all the purchases you made for that day in their respective categories. Continue doing this for each day of the months until all your purchases have been put in their appropriate categories. Then total the amount of money that was spent in each category for the month.

Now you’ve got an idea of what your money is being spent on each month. Take a look at your totals - do some seem to be outrageously high? Are others lower than you expected? If you need to you can further break down categories - for example instead of “food” you might have “groceries” and “eating out” because those are very different purchases. If you feel the need to break any categories down do so and then recalculate your totals - you  may get a very different view of your spending.

Now make a list of the top three areas where you’re wasting money - I know that can be difficult to do. No one wants to admit we need to stop buying quite so many shoes or that perhaps we’ll have to visit the spa a few less times a month but it’s important to be completely aware of your spending habits if you’re going to change them. After you’ve done that list the three areas where you’re saving (or could be saving) money each month either by setting up a budget or by making some lifestyle changes. Usually these will overlap with a couple of your areas that you’re spending too much in. Sometimes they will be things that can’t really be cut back though (like your rent - can’t really budget that one down unless you want to be evicted) but most of the time there will be areas you can cut back on.

So you’ll have an idea of where your spending weaknesses are and where you can afford to temper that spending a little bit as well as an idea of any bad spending habits you might have developed over the years. Use this information wisely. Don’t end your thirty day trial by shrugging your shoulders, returning to your old spending habits, and then wondering where all your money is going. Armed with knowledge about the way you spend your money take control of your finances and begin moving them into a direction that you want to go. It may take time and patience but you will definitely be able to make a huge difference in your financial situation just by being more conscious about your money.