How much money do you spend every week on coffee from Starbucks? Do you have any idea how much those quick stops into the convenience store to purchase a pack of gum are costing you? What about gas—do you know exactly how much money you spend on gas each and every week?
More than half of the population these days is living paycheck to paycheck—often writing checks a day before payday to cover necessary expenses they don’t have the money to pay for. It’s one thing to have a budget and pay your bills on time, but most people don’t really know where the money they earn in their paycheck goes. This is why it’s so important to start tracking your money. In fact, a Money Magazine article stated, “The most important first step in setting up a household budget and planning for financial success is to spend 15 days doing nothing but tracking your money!”
And yes, this means tracking every penny. Most people, even those who are paying bills on time, are surprised to realize just how much they spend on little incidentals such as eating out, buying gum, or stopping for a latte on a weekly basis. When you multiply these expenses over a month or a year, the amount of money being ‘wasted’ or spent without thinking can add up to thousands of dollars.
Tracking Your Spending for Better Financial Control
The best way to track your money is to use a chart divided into categories. You should have a category for bills, food, gas, eating out, pocket money, lunch money, etc. Try to be as specific as possible. Then, throughout the course of the 15 days, write down the amount of money you spend daily (down to the penny) in each category. You might find that you’re spending more on entertainment or lunches than on your grocery budget. Once you see exactly where your money is going, you can start to formulate a budget and identify areas where you can cut back to save money each week.
Limiting your trips to Starbucks, for example, from five to just twice a week can save you close to $40 per month (or more, depending on your indulgences). Bringing lunch from home instead of eating out three times a week can save you around $100 (or more) each month. You can also assess other ways to save on monthly expenses such as your cable bill or cell phone service. Additionally, if you’ve been a long-term customer of your electric, phone, or cable company, you may qualify for unadvertised discounted rates. Calling credit card companies to see if you can reduce monthly payments or interest rates can save you thousands of dollars over the years. Many companies would rather offer you a discounted rate than lose you as a customer, especially if you’ve been a good one.
You should also look at your money tracking and identify how much you’re spending on needs versus wants. If you like to buy clothes and shoes and realize that you spent $300 on clothes in one month, you might decide that’s too much and an area where you could easily cut back. Financial experts from Schwab believe that most people have a skewed view of what they ‘need’ versus what they ‘want.’ Do you really need to buy name-brand cheese instead of store-brand? Do you need the most expensive shampoo money can buy? Tracking your spending helps you pay attention to your purchases. Before making a purchase, ask yourself: “Is this something I need, or just something I want?”
If you need help with budgeting, tracking your spending, and becoming more mindful of where your money is going, you’re in luck! There are apps designed for this purpose that you can use on your devices.
Here are some of the most popular money-saving, tracking, and budgeting applications according to Wired:
- iReconcile – This app costs $1.99 per month or $19.99 per year. It comes with a variety of features to help you on a daily, weekly, monthly, and even yearly basis.
- xpenditure – This app costs a one-time fee of $1.99. It’s packed with many options to help you stick to a budget.
- MoneyBook – Another highly functional app that costs $2.99 from the app store.
- Toshl – This is a free money-tracking tool that’s easy to use across devices.
- Mint – Mint has long been considered one of the most highly functional money-tracking and budgeting apps available. It’s available on both PC and smartphones/tablets. The best part? It’s free and allows you to sync all your accounts, providing real-time updates on your money coming in and going out.
When it comes down to it, you work hard for your money. Living paycheck to paycheck may be a reality for you, but there are ways to spend more wisely. The first step is being able to track your money and gaining a full understanding of where most of it is going. Bills are part of life. Too many people feel financially strapped and are unable to build a nest egg, even if it’s a small one. By being frugal, paying attention to your finances, using apps like these, and staying conscious of every penny you spend, you’ll become more informed about your finances and better equipped to make the most of your hard-earned income.