If you’re like most people, you have no idea where your money goes each month — which is interesting since you are the one spending it.
Tracking your spending for the first time can be an eye-opening experience. In fact, it shocks most people the first time they do it.
I don’t remember what I did 23 days ago, so how would I remember what I spent my money on 23 days ago? It’s impossible to remember every coffee, every bill and every Amazon order. There’s just too much to keep up with between online and offline purchases, bills and autopay. It’s for this very reason that you need to track your spending. The good news is that you don’t have to remember it all, you just have to track it.
When you’re trying to lose weight, you step on the scale. When you’ve got a meeting in two hours, you keep an eye on the clock. When you’re building a bar for your basement, you measure before cutting the wood. When you want to manage your money better, you’ve got to know where your money is going.
The first time my wife and I tracked our spending, I was shocked to uncover how much money we were spending eating out. It took a little while to get over feeling like a moron for spending such an outrageous amount of money at restaurants that I don’t even remember going to. What made the situation better was when I realized how quickly and easily we could cut back on eating out and start saving money.
Tracking your money is easy. And even better, it’s well worth the time. You could start by printing off your bank statement and putting each expense into a category. Then add them all up to see how much you spent. You can do this with pencil and paper in about 20 minutes. This is how my wife and I started, and some people only use pencil and paper to track their spending.
Or you could see if your bank’s website offers a tracking tool. Or you could check out one of the many budgeting apps for your smartphone.
Or you could download the free and awesome budgeting spreadsheet with spending tracker at my website, howdoimoney.com. It even does the adding for you after you’ve punched in each expense.
Derek Olsen is a monthly money columnist for Ink. For more resources on getting out of debt faster, building a better budget and growing your net worth, visit howdoimoney.com.