Keeping Track of Your Money
One of the keys to sticking to a budget is always knowing where your money is going. However, a lot of people have trouble with this. Small purchases and impulse buys here and there add up and, before you know it, you’re looking at a bank account that is smaller than you expected or a credit card statement that is larger.
This situation can lead to feelings that there’s never enough money to go around. This can not only cause debt problems, but also lead to negative emotions, such as stress, anxiety and depression. Financial struggles and money issues aren’t just a matter of numbers. These concerns affect every aspect of your life and influence your behaviour, your relationships, your self-worth, and much more.
Not knowing where your money is going can lead to various emotional reactions. Some people worry and stress. They feel anxious about money and can be overwhelmed by the cycle of money going in and money coming out. Other people eventually stop paying attention to where their money goes, or how much of it is spent, believing that there is nothing they can do. Each person will have their own reaction to money issues and that’s perfectly natural.
However, one way to overcome these negative reactions is to understand where your money is going. This begins by tracking your spending. Please read our post on Five Tips for Tracking Spending for some advice on how to track your spending.
Once you’ve kept track of where your money is going for a while, the next step is to get it under control.
It’s also important to understand why you’re spending money in addition to figuring out how much you’re spending.
Recognizing Spending Patterns
Recognizing your spending patterns is important. Once you’ve tracked your spending, you’ll probably start to see some patterns. Each person spends differently. Some people spend the majority of their disposable income on eating out, others spend it on clothing, others still may spend it on entertainment or coffee or cigarettes or a wide variety of other things. To control your spending, you’ll need to recognize what you’re spending your money on and make changes as necessary.
It’s also important to act quickly if you realize that you’re spending all or nearly all of your money on basic expenses. If you track your spending and recognize that all of your money is going towards housing, groceries, debt repayment, and basic transportation, then you may need to act. This situation doesn’t give you any opportunities to save, so you may want to speak with a financial professional for some advice.
Realizing that Spending is Psychological
Unless you’re spending all of your money on the basic necessities of life (and, as mentioned above, you may want to speak with a financial professional if you’re in this situation) it’s important to recognize that spending is psychological. This means that, at least part of the time, people spend for reasons other than a simple exchange of money for goods or services. For example, if you’re having a bad day, you might be tempted to buy yourself a new pair of shoes to make yourself feel better.
Spending money can give us a “high” that makes us temporarily feel happier when we’re feeling down. To avoid this type of spending, you’ll want to find a healthy substitute that gives you the same feeling, such as physical exercise or a chat with a friend.
Also, spending is often a habit. Consider your morning coffee. If you buy a coffee every day on the way to work, that’s a habit. These habits are tough to break. To break them, you’ll first need to recognize them. Then you’ll need to replace the habit. This can be done by making coffee at home instead, for example.
If you go out for lunch every day during your lunch break, think about why you’re doing this. Is it really for the food or is it because you want to get out of the office for a few minutes? Or maybe it’s because you enjoy the walk or the people you take lunch with. If this is the case, try to come up with a way to get the same benefits without the added expense.
As you can see, managing impulses and replacing spending with other beneficial activities is the key to holding onto more of your money. Over time, doing this will put you in a stronger financial situation and it all begins by understanding where your money is going and why you’re spending it.