It’s impossible to chart your monetary course without some preliminary work. After all, how do you get “There” if you don’t know where “Here” is? The first step to figuring out where your money leaks are is to keep a written record. Grab a small notebook and write down every penny that leaves your hands every day.
That’s all there is to it. Stop at the gas station for a cup of coffee? Write it down. Left a $1 tip at the coffee shop? Write that down too.
Photo By Suat Eman
If there are other people in your household, encourage them to log their spending too. Household finance isn’t just about one person. Getting your money moving in the right direction requires a everyone’s participation.
Choose a good day and time, once every week or two, and review the spending log. If there are other adults in your household, make sure everyone is involved. When you start to review your spending, something amazing happens. You really see where your money holes are! It’ll go like this: “WOW… I didn’t know I spend $28 every week on cigarettes (or sodas or coffee or candy or video games or …)! That’s $1456 every year… That’s 4 car payments every year on junk! I can use that money to make our finances better by… (putting it in savings, paying off our debts faster, investing in my 401K, …).”
Over time, you’ll find that the knowledge that you’ll have to write down every single penny will curb some of your impulse spending. Your mind will automatically start equating the bad purchase amounts to good purchase amounts such as “I could spend this $3.00 on a coffee, or I can get a cup for free at the office and use that $3.00 toward building our vacation fund a little faster.”
After a few weeks, you’ll see a dramatic change in your impulse purchase (hopefully!) and be well on your way to making your money work for you, instead of the other way around. Cutting $20 a week in impulse spending will save you $1040 a year. Broken down a little further, that’s $2.85 a day. That’s it. Less than one gallon of gas or half of a McDonald’s Super Value meal. All for the cost of a $.99 little notebook to track where your money is going.
Start turning your family’s financial ship around by cutting 50% or more off your grocery expenses, household cleaners, toiletries, dining out, and more. I use this system and save 60% to 75% off retail prices every single week.
