We are now on our second part of getting spending under control, which is tracking your spending. You’d be surprised at how many people simply fail at tracking their spending in any way, let alone even attempting to do it. Remember, when you TRACK your spending you CONTROL your spending. Controlling your spending is the key to freeing up money to pay off debt, pay less taxes and retire comfortably.
The important parts of tracking your spending properly are:
- You need to track ALL of your spending. Many couples or people will hide spending by pulling out cash and not tracking it, putting overspending on things in wrong categories.
- Your spending needs to be broken down into categories. BEFORE you spend your income, you need to know, which you will know if you followed step #1 and REVIEWED your spending, how you spend your money. Set up spending categories like this: groceries, dining out, gas, utilities, mortgage/rent, debt, etc. Line them up and alphabetize them for easy use.
- You need to have a tracking system for you, whether on paper or on the computer. Money Mastery has an excellent paper tracking system that is designed to fit in your checkbook here:http://www.moneymastery.com/store/StoreDetail.aspx?id=X3JGJ0V1gZ8%3d. We also suggest Quicken for computer-savvy people.
When you track your spending you need to break it down into categories. It’s easy if you go to a gas station and buy gas because it’s only one category. But, what if you go to Wal-Mart and buy a large ticket and spend in 4 different categories on the same receipt? Watch this video for an explanation:
Now that we know how to track, we need to make sure we are on track to see how our spending is going during the month. BEFORE you start the month you should spend at least half an hour going over what your planned expenses in the month are and give yourself limits to spend in each category in your spending plan. That way, you know when you are about to overspend! This is true control. Then, you need to spend 15 minutes each week meeting about what you have spent so far and what you plan to spend in the upcoming week.
This is true control! Remember, we don’t do this for fun, we do this to free up money to pay off debt, ALL debt, in 9 years or less (yes, including your mortgage) which will allow you to plan for a very comfortable retirement. By simply tracking your spending this way, we guarantee the following:
- You’ll find 1% of your annual income monthly that you are wasting. For example, if you make $50,000 a year, you’ll find $500 a month you are wasting. Yes, that’s true. We have wagered with many clients about this and have never lost. The average is to find $312 a month in simple waste spending.
- You won’t fight with your spouse about money anymore.
- You’ll feel more in control of your spending, which will spill over into other areas of your life, like your health, your mind and soul.
Remember, RaTiFy your spending!
- Review your spending
- Track your spending
- Forecast your spending
We have hit the “R” and the “T” in the RTF of spending; next week we’ll talk about the “F”, forecasting your spending!