For over a decade I have recorded every dollar I spent. Every. Single. Dollar.
You might wonder what the point is about recording your spending. I mean, surely the little things don’t matter? And surely it takes too much time? And perhaps you might even think it is controlling or perhaps a little bit obsessive.
Until a few months ago, I made a point of using cash wherever possible. This is because I believe that you are less likely to spend money if you use cash. I withdrew an allocated amount each fortnight, and when that was gone I didn’t spend any more. Now I use a Qantas Cash debit card. I do this so that I can earn Qantas Frequent Flyer points. It also gives me a list of expenditure. The ease of being able to make purchases easily is a potential trap, though. I will reassess in a few months’ time whether this new system is working for me.
For years I used a free pocket diary that I got from my credit union. I would record the spending in the diary. Later I splurged on a $2 diary. Now I use an app called Good Budget. There are plenty of apps around that can help you track your spending, including more sophisticated ones like YNAB. ASIC’s Moneysmart website also has developed a TrackMySpend app, which helps identify what is a need and a want. The essential part is to find a system that works for you.
Recording your spending, each and every item is really important if you want to get ahead financially. If you can’t commit to doing it for a decade, just try it for a week. Here’s why:
- Recording your spending increases your mindfulness. Mindfulness. That buzz word that everyone is talking about. But really, recording your spending DOES increase your mindfulness because it forces you to think about what you have just done. It is so easy, these days, to just Paywave whatever you want. You don’t even need to use cash! When you stop to record your spending, it gives you the opportunity to pause and contemplate how the experience was for you. Did you really enjoy that $4 cup of coffee? Did you actually taste it? Was it an amazing experience for you that just made your day, or did it taste like lukewarm mouldy dishwater? Did you really want it at all or were you just buying one because everyone in your team did?
- It is easy to leak money if you don’t record it. You probably know that feeling of getting to the end of your pay week and wondering whether all the money went to. I mean, wasn’t there heaps of money in your account before? Where has it all gone? Much of our money goes on the small, discretionary purchases that we make every day. The tiny, optional things we don’t really need and which are not life-saving. For me, it is the fabulous cafe at work that has freshly baked treats. I love the cake and biscuits from there, but really I am overweight and don’t need it. Forcing me to write down what I spend my money on keeps me accountable because that way I at least know where it has all gone.
- It provides essential data for your budget. Budget, you know, that dirty word that many of us are scared of. At the end of each month, I add up all up my income and expenses and put it in a spreadsheet. I have been doing this for years. It is my moment of truth. I recently used all of this data to formulate a budget. It is no point saying that I live on bread and water and only go out for dinner once a year as I would just be lying to myself if this was the case. Having good and reliable data is integral to allowing me to see how much I really spend on things like groceries, petrol and dining out.
- It makes you accountable for your spending. It’s a bit like going on a diet – if you don’t own what really goes into your mouth, you aren’t really going to be able to stick to a diet. (Note to self, as I seek to stick with #wellness2018). Writing down what you spend holds you accountable.
- The mega-wealthy know where their money goes. Every single dollar. Over Christmas (as my Neil was in hospital) I reread The Millionaire Next Door. There is a whole chapter in there about how wealthy people, genuine mega-wealthy people, track their money. They know exactly where their money is going and they spend a lot of time in recording these things. Many of them are now at the stage that they no longer need to do this, yet they still do so.
Your challenge for today is to track your spending. No guilt. Buy whatever you want to, spend money in your usual way, as if you were spending as per usual. Just write it down. And stop by the Frugal Dare to Millionaire Facebook group to share how you found the experience.