26 Jul Are you spending more than you earn?
Where is your money going day-to-day? You may think spending up on big things is what gets you into trouble with money. But often it is the everyday little things that end up costing more
over time. Where does your cash go each day? It’s easy to lose track of $5 here, $10 there.
You might think I will do a spending diary! Trust me, having a spending diary is one of the many ways to find out where your money is going! Want to know about the other ways? Keep reading!
Make a simple budget, even if you don’t need it
Some anxiety about spending comes simply from not being 100% sure what’s coming in and what’s going out. “Stress comes from fear of the unknown”. Think of your budget simply as a “mission statement.” Start by going over your credit card and bank statement to make sure that your cash outflows into broad categories like savings, vs., say, food and entertainment, aren’t too out of line with your priorities. It doesn’t have to be every penny.
The best way to take control of your household finances is to do a budget. This is a simple tool that helps you understand the money going in and out of your household. It shows you if you are spending than you can afford. You can then act to find the right balance between spending and saving.
Match your budget with your bank statement
One way to keep an eye on your spending is to match your budget with your bank statement. Check your bank statements by look at the money coming into your bank account and the money going out. Use both your transaction account and credit card statements to see if your budget truly reflects your spending.
Use more cash
One famous experiment found that people were willing to pay almost 80% more for a football ticket when using credit instead of cash. “You just swipe, and you don’t have to think about it”.
If sticking to your budget goal is a challenge for you, switch to the old system of withdrawing a week’s worth of cash for your routine purchases, putting it in envelopes marked “groceries,” “entertainment,” and so on. “You have to stop spending when you run out of money”.
Check for spending leaks
What would you do if you had $1,000? Use it for a holiday? Put it in a savings account? Pay off your credit card? Or buy a cup of coffee? That’s right, just one $3.50 cup of coffee every morning will cost you nearly $1,000 over a year.
Spending leaks are those small regular purchases, like a morning cup of coffee, that add up over a period. If you’re trying to save some extra cash, think about your spending leaks.
Because spending leaks are often the fun things like drinks or entertainment, don’t cut them out completely. Instead, choose just one or two things to cut back on. Or think of ways to spend smarter:
- Instead of spending $3.95 on a magazine every week, or $205 over the year, take out a subscription, which will cost $148 for the year
- A gym membership can cost $60 a month, or $720 a year, but going for a walk or a run is free
- Going to the movies once a week costs $20, or about $1000 a year, but hiring a DVD instead can more than halve this cost
Compare your money in and money out
The next step is to look at where your money is going month-to-month. How much money is coming in? How much is going out?
Think about where your money goes each month:
- weekly basics like food, groceries, transport
- regular bills like rent or mortgage, electricity, phone, insurance
- less frequent spending like clothing, holidays, car registration,
- medical expenses.
Prioritize where you want your money to go
How do you make my money go where it matters most?
The next step is to refine your budget and direct your money to where it matters most. This will help you find the right balance between spending and saving. It might sound simple, but using buckets is a good way to sort out your money priorities.
Imagine you have a big bucket filled with water. This represents all your money coming in-the total income you entered the budget planner. Then you have three smaller empty buckets to help you work out where you want your money to go. Of course, you can’t pour out more water than you have. So, with the amount available, you decide how much to put into each bucket.
How to use the budget buckets
First, put in enough money from your income bucket to take care of your needs. These are the necessities, the expenses you must pay in order to live.
Do a spending diary
Another way to work out where your money is going is with a spending diary. Make a note of everything you spend for one pay or benefit period or at least a week. This will only take a few minutes a day.
Here’s what to do:
- First, decide how long to track your spending (for example, for a week, a fortnight or a month). Choose a timeframe you know you can stick to. The important thing is to do it every day.
- Get a small notebook to use as your spending diary. Take it with you wherever you go. Or, if you have a smartphone, download a free spending tracker app.
Seek Professional Advice
There might be some situations when you need professional advice on money management. With the professional help, you can stop living week-to-week, put a debt management plan in place and start saving.
So, if you want to get off the debt treadmill and start achieving your financial goals, speak to our money management expert. We will analyze your financial situation and will help you to design a workable budget plan.
Everybody’s needs are different-some need help with managing money and debt or saving. Whatever your goals are, we can help you achieve that.
Want to know more?
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