As a financial counselor, I work with people every day looking for ways to balance spending plans and income when money runs short. Only recently did it occur to me that all those numbers clients were tossing at me may not be truly accurate. Sure, I would question an expense if it sounded off, and then suggest the obvious: “maybe you should track your gas costs (or whatever) to see how much you really spend!” After all, what good is a budget that balances on paper if the numbers are not real?
Speaking from personal experience, I know how easy it is to underestimate how much money your household spends each month. While my partner and I knew we were not spending more than we earned, we also knew we were not meeting our savings goals.
So, what was the problem?
Were our saving goals unrealistic, or did we actually spend more than we thought? Although I told others to track their spending, I had never done it myself. Taking my own advice, I began documenting where every dollar went as of January 1st. I diligently saved all my receipts, and grilled my partner over her expenditures. To pull it all together, I created a spreadsheet with a multitude of household categories, all color coded to pinpoint the exact source of the expense.
Did I learn anything from all this effort?
You bet – I discovered that overspending was definitely the culprit! It’s not that we overspend on ourselves. In fact, we typically have to force ourselves to shop for new clothing or household goods. We also don’t eat out much simply because we live so far from civilization, you need a GPS to find the nearest restaurant! We joke about getting our money’s worth when we use an item for at least 10 years. Some folks might call us cheap, but I think of us as frugal.
So, where was all our money going?
We own a hobby farm with lots of critters. It is astounding how quickly animal feed, vet care, and regular maintenance can add up! There are also utility costs in the barn for lights and heating water in the winter, fans to cool the air in the summer, and the electric fence to keep everyone home year-round! While you may not have a hobby farm, you likely have other expenses that seem to get away from you, and prevent you from reaching your financial goals.
Now, some of you may think that tracking your spending is a royal pain! And, quite honestly, I wouldn’t disagree. But, the truth is tracking can be very enlightening and ultimately, pretty darn useful, if you really want to gain control of your budget.
The best thing about tracking is it shows where your household leaks money. In turn, you can make changes to spend money where you need it most. Or, it can help you to save more cash for other financial goals, like a vacation, or a child’s college fund, by setting limits for discretionary spending like clothing, entertainment, gifts, eating out, etc.
The next best thing about tracking is it is temporary! Once you have done it, you can make the adjustments you need and go merrily on your way. Or, if you are really into it, you can track forever to keep a handle on your money. But if you’re like me, and have better things to do with your time (or at least think you do), simply track to see where your finances stand now, and do it occasionally going forward when your circumstances change. I recommend tracking for at least 2 months for a clearer financial picture. But, do what works for you, and I guarantee you will get more from your money!
So, what about our spending?
I will likely track throughout the year as our expenses fluctuate with the seasons. But with the information gathered to date, we have already made changes to get us closer to our savings target. To make savings actually happen, I started having a designated amount automatically deposited in my savings account from my paychecks. But that’s more for another post!
Want to learn more about tracking spending and creating a budget? It all begins by taking the first step and empowering yourself to get the tools to conquer your debt! So don’t wait any longer. Call us at 888.577.2227 or get started with online counseling now.
Author, Barb Miller is a Bankruptcy Counselor at LSS Financial Counseling.