If you’re having trouble reaching your financial goals, I highly recommend taking the time to track where your money goes each month. Spend-tracking changed my family’s financial life in a big way, and it just might do the same for you...
The following post is by MPFJ staff writer, Laurie Blank. Laurie is a wife, mother to 4 and homesteader who blogs about personal finance, self-sufficiency and life in general over at The Frugal Farmer. Part witty, part introspective and part silly, her goal in blogging is to help others find their way to financial freedom and to a simpler, more peaceful life.
One of the reasons it took us so long to start making efforts to get out of debt was because we were convinced that our debt problem was the result of insufficient income.
When we looked around at our home, our possessions and the lifestyle we lived, we didn’t see anything extravagant. There were no newer cars, we didn’t take vacations, we bought clothes on clearance at the big box stores and we didn’t have a spendy social life.
Because of these things, we figured that our ever-rising consumer debt loads were caused by the fact that we simply didn’t make enough money to support our family.
That all changed when I started reading personal finance blogs for the first time at the end of 2012. When I found real-life stories of people like me that were actually succeeding at getting out of tens of thousands of dollars of consumer debt – despite their incomes – I started to question our beliefs about our money situation.
One of the things these many personal finance bloggers mentioned over and over was spend-tracking. To be honest, this seemed like a mundane, pointless chore when I first started reading about how spend-tracking worked, but I was in a desperate situation with a 65% debt-to-income ratio so I figured I’d better start taking advice from somebody who had beaten their debt problem, because my debt was certainly winning the battle against me.
Reverse Spend-Tracking First
As a way of working to determine how we’d made such a mess of our money in the first place, I decided to go over our 2012 credit and debit card numbers and track the spending categories I knew I could track easily:
While we had always set budget numbers for these categories each month, we never really tracked our spending in them. I figured it would be helpful to see how close our actual expenditures were to our half-hearted budgeted amounts we wanted to spend in those areas.
What I found wasn’t pretty.
- I thought we were spending around $600 a month on groceries – in reality, we were spending about $900 a month when we added in random grocery runs.
- I thought we were spending about $75 a month on entertainment and eating out – in reality, we were spending closer to $175 a month.
- I thought we were spending about $100 a month in gas fill-ups – in reality, we were spending about $200 a month.
Suddenly, the reason why our debt balances kept rising each month was becoming crystal clear. We were spending much more than we had budgeted for in several categories and had no idea that we were doing so.
And I’d only reverse-tracked three categories. Can you imagine what I would have found if I’d tracked everything?
How Spend Tracking Changed our Financial Life
Although going back over our previous year’s spending was painful and sickening, it did give us the motivation we needed to start doing things differently.
Starting in January of 2013 I started tracking every dime we spent on an Excel spreadsheet, and I’ve been doing so ever since.
I can tell you exactly what we’ve spent on entertainment, groceries, home repairs and everything else for the last five straight years.
Arming myself and my family with this knowledge has given us a powerful personal finance weapon:
The ability to reroute our spending away from things that are of little value to us, and direct it toward things that are of more value to us.
As an example, after we realized that we were spending nearly $200 a month on eating out and that eating out didn’t bring us that much joy, we were able to reroute that money toward debt payoff.
We found that we didn’t miss eating out at all – in fact, on the rare occasions we do eat out now it’s much more enjoyable because it’s the exception and not the rule.
Bonus: we’re increasing our financial stability more and more every month in the process.
Why You Should Strongly Consider Tracking Your Spending
If you’re having trouble reaching your financial goals, I highly recommend taking the time to track where your money goes each month.
By doing so you can learn to practice value-based spending; spending your hard-earned cash on the things that mean the most to you, and stopping spending your money on the things that aren’t important to you.
Spend-tracking changed my family’s financial life in a big way, and it just might do the same for you.
***Photo courtesy of https://c1.staticflickr.com/7/6106/6355818699_a9bed226f8_b.jpg
