If you really want to save money and stop overspending each month, a financial planner might recommend tracking your spending for an entire month or possibly even longer. Tracking your spending is the best way to find out where every dime you earn is going. While this might take you some extra time each day, it will help you find areas in your budget you can cut, and here are some tips to help you do this.
Understand the purpose of this activity
The purpose of tracking every dollar you spend is so that you can see exactly where your money is going. Many people do not realize how small purchases they make each day add up to a lot of money, and many of these small purchases are not even necessary. If you feel like you never have any month left at the end of the month, it might be wise for you to start tracking every purchase you make.
How to do this
There are several ways to keep track of every purchase you make, and here are two options:
- Use a debit card or credit card only for an entire month – At the end of the month, you can write down all the purchases you made and place them into categories. This will show you exactly where every penny went.
- Use cash and keep receipts – The other option is to withdraw cash from your account and use it for every purchase. Each time you make a purchase, keep the receipt and write down all the expenses you made, keeping each one in the category for what it was.
What you can learn from it
No matter which method you use, you will end up with the answers to where your money went. Through this, you can discover all the money you may have wasted on things you really didn't need.
For example, if you found that you spent a lot of money buying cold bottles of water from a gas station, you could cut this expense by a lot. A bottle of water at a gas station is usually at least $1, while you could buy an entire case of water on sale for around $3. Taking a bottle of water from home each day could help you save a lot of money. This is just one example of what you can learn from tracking your expenses, but you are likely to find a lot of other ways to cut your spending too.
Tracking your spending is a great way to find areas of your budget you can cut, and this activity could make a big difference with the way you spend your money. If you would like advice or other tips about budgeting, visit a financial planning firm today.