Track Every Penny You Spend (Article #1 in a Series of 5)
Would you like to have more control of your money? More than ever before, Americans are drowning in debt. According to Experian’s National Score Index, at least one in ten consumers has more than 10 credit cards in their wallets. The overall average number of credit cards per consumer is four. And, the average balance for the American family is approximately $7,400 in credit card debt.
How can you avoid being in this situation? There are five critical steps to follow to help you get more control of your finances, which are:
- Track Every Penny You Spend
- Develop a Useful Budget
- Start an Emergency Fund
- Get Out of Debt
- Focus on Your Future
In this article, we will focus on the first step in the process, which is: “Track Every Penny You Spend.”
One of the first things you need to do to get your finances in order is to track everything you spend…down to the last penny. It doesn’t matter how you track your spending, you just need to do it.
Some people track expenses automatically using a computerized money management program, such as Quicken or Microsoft Money. Others track their spending manually by saving receipts and entering them into a cash notebook or on a computer spreadsheet. Whichever method you choose, stick with it, make it a habit, and record your transactions as soon as possible.
For example, every morning as part of her daily routine, Jane downloads her checking transactions on her computer through Quicken and then categorizes them. That way, she only has to categorize a few transactions from the day prior rather than many transactions from a week or month ago. She does the same with all of her credit cards and any other accounts she has. At the click of a button, she then knows exactly how much she has spent to date, how she is doing in comparison with her monthly budget, and most important, how much she has available in her accounts.
This step in the process is all about gathering data, not judging how you spend your money or making drastic changes to your current money management habits. When you see something written down, you may be motivated to live within the budget you have created. You may find that you are spending too much on fast food, or maybe the cost of commuting is much higher than you thought due to higher gas prices. Whatever the case may be, it gives you the first step in taking control of your finances.
You should gather data regularly and keep record of what you are spending for at least 30 to 60 days so you will know what your tendencies are in terms of monthly spending. Then, you will be ready to move on to the next step in the process, which is: “Develop a Useful Budget.”