Slowly but surely, my spending put a huge dent in my finances. For years, I dropped hundreds (thousands?) of dollars a month on little things that added no value to my life. I never thought about the bigger picture.
I reached rock bottom a little less than 2 years ago. My credit cards were maxed out, I had over a thousand dollars in car payments, and I hadn’t put a dent in my student loan in years. I was six figures in debt.
Many financial experts recommend tracking your spending habits for a month before embarking on a money makeover, but at first I was reticent to do so. Recently, I have felt comfortable enough to try it out, and it has worked wonders even after I have overhauled my spending!
So here is a one month challenge for you all:
Track Your Spending
The best thing for you to do is keep a little notebook in your pocket to record everything you spend money on in a single month, from a pack of gum to a book on Amazon to an itemized grocery list to song purchases on iTunes. Write every single thing down! If you can’t write it immediately, get a receipt and write it all down at the end of the day.
At the end of the month, go through your expenditures and mark things as either essential or non-essential, then total each amount.
If you are like me, you will be shocked (and humbled) by this exercise. Even after 16 months of frugality, I still spent more on non-essential purchases than I wanted to. Back when I was overspending big time this was way worse, and more than half of the money I brought in during an average month was wasted. I routinely spent more than I earned.
After you go through tracking your expenses for a month you should repeat it, except this time you ask yourself whether each purchase is essential or not before buying. Just asking yourself this question before buying will ensure that your non-essential purchases will go way down.
I still ask myself this before every purchase: Do I really need this? If the answer is no, then I will put it back on the shelf (or close the browser window!) and give myself a few minutes of breathing time. I usually never buy the item after doing this.
If you have followed my advice and sold a ton of your stuff before embarking on the budget, you will see that your expenses are lower, and that you don’t want (or need) as many material goods. I have outlined in previous posts several ways to ditch your items. I recently learned of a great website called www.musicmagpie.com, where people have sold DVDs, videos, and games for hundreds of pounds/dollars as they decluttered. Definitely check it out!
If you’re drowning in debt like I was, try tracking your expenses for a month. At the start of the month, begin a spreadsheet that includes every single expense you have. At the end of the month, mark each item as essential or non-essential and total each, then compare those amounts to what you brought in for the month.
If the non-essential amount is anywhere close to the essential amount, you have a lot of fat that you can cut from your spending. All that money can go to debt or, even better….savings! Good luck!
Other resources to check out: