Sometimes we don’t realize that we have a spending habit – we fail to see those small everyday purchases. The Redbull at the gas station, the chapstick at the checkout line, the item from the One Spot in Target – all those little extras that start to add up and wreak havoc on our budgets.
So, how do we cure those spending habits? How do we develop strong spending habits instead of weak ones?
Write it Out
By now, you know that you need to and should have a written budget but let’s be real for a moment, many of us may write down our budgets but how many of us actually stick to them? Usually, we wreck our budgets as a result of those little purchases that slip through our fingers like sand. And although a written budget is the first step in identifying those small purchases, there is nothing like tracking your expenses to make you realize what it is you spend.
This will be hard, in fact, you’re probably going to hate it but that’s why this works. For the next month, hand write out every. single. purchase. Carry a small notebook, pen with you, and as soon as you get into your car or sit down at your desk at work, write out the purchases you just made. You need to do this within an hour of making the purchase and you need to avoid the temptation to just shove your receipt into the notebook – a receipt does you no good if you don’t actually use it to track your spending. That’s why I’m making you hand write out your expenses.
I encourage you to be specific when tracking. Example of what your spending log should look like is this:
April 26, 2015
QT – Total: $14.95 – RedBull – $4.75, Cigarettes – $5.95, 2 Packs of Gum – $4.25(can you tell I stole this example from one of my hubs’ gas trips? 😉 )
Chick-fil-a – Total: $9.97 – #1 with water, Kid’s nugget meal
Target – Total: $23.67 – Dog food – $9.99, dog treats – $5.99, and new leash – $7.69
Get the idea? The more detailed the better because in the next step, you’re going to analyze just where you spend your money – where the leaks are in your spending and budget.
If you read my book Real Life on a Budget, you know that a money minute is crucial to keeping your finances in check and a money minute will serve you well during your month of curing your spending habits.
At the end of every day, you need to manually tally up what you spent for the day. Once you have your total, look at your budget and determine if you spent any money that was actually budgeted for. Were those extras at QT something that was in the budget or where they just impulse buys? Did you plan to stop at Chick-fil-a on the way home or were the kids driving you crazy so you caved? (Happens to me more than I’d like to admit!)
By forcing yourself to track what you have purchased every day, you will start to see where your spending habits and your budget don’t align.
To Budget or Not to Budget?
After your month long tracking fest, it’s time to determine if these expenses should be included in your budget. I know, you’re screaming right now, “But I don’t have the money to add this to my budget!” And that’s probably very true, in fact I’m willing to bet it’s the reason why your budget hasn’t been working – you haven’t been paying attention to your spending habits and they are causing you spend money you don’t have.
So now, you have to ask yourself if these expenses should be in your budget. If you’re consistently spending on those extras – buying a RedBull almost every day, or purchasing fast food every week (even if it is just one day a week), these are expenses that you need to be including in your budget. Of course, you can always try to go without these expenses but you need to be realistic and ask yourself if you can do without them.
What I mean is, can you really go every day without a RedBull or is it something that you will find yourself still buying after you’ve cut yourself off? If it’s something that you’ll still purchase regardless, it needs to be in the budget.
How Can You Save?
Using the RedBull example from above, if it’s something that you determine should be in the budget, it’s time to determine if you can save money. For example, would purchasing a pack of RedBulls at the grocery store during your weekly grocery shopping trip help keep you from purchasing one every morning at the corner store? If so, include this expense in your grocery budget.
Do this analysis for all the expenses that you determine should be in your budget. You may find that you can actually save your budget by recognizing that you value those little expenses and including them in your budget.
Throughout this exercise, you should not only be able to determine where the holes in your budget are, but also if what you already have budgeted should be in your budget. Do you really need to have $100 a month budgeted for clothes or can you make do with less? These are all critical questions to ask yourself to keep your budget and yourself in check with your spending.
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Money controlling you? I know the feeling. My family has been living this real life on a budget for a long time and I can tell you that there's never a perfect season, but with a few changes you can start to reign in your money issues.
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