Taking control of your money starts with understanding your spending habits. By knowing where your money goes, you can make informed choices to spend less and save more.
This guide will take you through three simple steps to track your spending effectively and develop healthier financial habits.
Let’s Get Straight to the Point
To take control of your finances and save more money, start by tracking your spending daily or monthly to get a clear picture of where your money goes.
Next, review your spending habits to identify areas for improvement, focusing on separating “needs” from “wants.”
Finally, make small changes, such as cancelling unnecessary subscriptions, setting spending limits, and creating a budget to prioritise savings and reduce expenses over time.
Small, consistent actions can lead to significant financial improvements.
Step 1: Keep Track of Your Spending and Expenses
The first step to financial control is getting a clear view of where your money is going each day. This insight lays the foundation for a more mindful approach to spending.
1. How Long Should You Track?
The length of time you track your spending can vary depending on your situation.
1. Track Daily Spending for One Week
If you’re just starting, record your spending every day for a week. This short period provides an immediate snapshot of where your daily expenses are going, helping you identify any immediate areas for change.
2. Track Fortnightly or Monthly for Recurring Expenses
If some weeks or months come with higher expenses due to bills or subscriptions, commit to a “financial fortnight” or a “money month.”
A longer tracking period gives you a more accurate picture of your spending patterns, including any irregular expenses.
2. Methods to Record Your Spending
There are multiple ways to track your spending. Choose one that fits your lifestyle for the best results.
1. Use Transaction Statements
Every transaction is automatically recorded if you typically pay with a card or phone app. You can access these transaction records through online banking or monthly statements to review where your money is going.
2. Use a Phone App for Real-Time Tracking
A spending app is an easy way to keep track of purchases as you make them. Many apps allow you to set spending limits, receive reminders, and get a detailed overview of your expenses, all at a glance.
3. Go Old School: Write It Down
Prefer a hands-on approach? Write down the amount, item (or store name), and date each time you make a purchase, whether by card or cash.
Keep receipts and review them at the end of each day to ensure you’re recording everything.
3. Stay Consistent
The key to successful spending tracking is consistency. Record your spending every day without worrying about changing your habits immediately.
Over time, this practice will give you a more accurate picture of your financial habits. If you need extra motivation, consider tracking your spending with a friend or partner.
Step 2: Review Your Spending Habits
After tracking for a set period, take a step back and review your recorded transactions. This reflection is crucial to understanding your financial behaviour.
1. Identify Where Your Money Goes
You’ll often find that small expenses add up quickly or discover hidden costs such as account fees, unused subscriptions, or even mistaken transactions.
By being aware of where your money goes, you automatically become more conscious of your spending decisions.
2. Practise Mindful Spending
To spend more mindfully, take a moment before making any purchase. Ask yourself:
- Do I need this right now?
- Can I get it for a cheaper price elsewhere?
This small pause can help you regain control over impulsive spending and make more intentional choices.
Step 3: Adjust Your Spending Habits
Now that you know where your money is going, it’s time to make small but impactful changes. You don’t need to overhaul your entire budget in one go; start with one manageable habit.
1. Separate Essential from Non-essential Items
Go through your transactions and identify which expenses are needs (essential items you need to live) and wants (non-essential items).
Highlight your “wants” as areas where you can potentially cut back or eliminate to save money.
2. Quick Wins to Cut Back
Start by cancelling any subscriptions or memberships you no longer use. Alternatively, reduce one small but frequent expense, like takeaway coffee or snacks.
Simple adjustments can quickly add up, providing you with extra cash to put towards savings.
3. Begin to Save as a Habit
Use the money saved from your “quick wins” to start a savings habit. Open a dedicated savings account or set up an emergency fund.
Putting even a small amount away regularly can lead to a significant financial cushion over time.
4. Set Limits and Reminders
Once you know how much you typically spend on non-essentials, set a realistic limit for the next week or month.
This can help prevent overspending. Additionally, calendar reminders for regular expenses should be used to set aside the necessary funds beforehand, reducing financial stress.
5. Come up With a Budget
Now that you’ve tracked your spending and made some adjustments, it’s time to create a budget.
A budget helps you prioritise your spending according to your goals and allows you to see how you’re progressing month to month.
With a budget, you can manage expenses, save more efficiently, and make room for what you truly enjoy.
Conclusion
Tracking your spending is an empowering way to take control of your finances.
By following these three simple steps—tracking your expenses, reviewing your spending habits, and making changes where needed—you can develop a healthier relationship with money, spend less, and save more.
The key is to start small, stay consistent, and celebrate the small victories along the way.
Empower yourself with knowledge and begin your journey toward financial freedom today.
Frequently Asked Questions
1. How long should I track my spending to see results?
Start by tracking your spending for at least a week to get an immediate overview of your daily expenses. Consider monthly tracking to include irregular expenses for a more detailed picture.
2. What’s the easiest way to track my spending?
Using a spending app is the easiest option as it automatically records transactions, sets spending limits, and provides an overview. Alternatively, you can check your bank statements or manually note expenses daily.
3. How can I identify unnecessary expenses?
Review your transactions and separate “needs” from “wants.” Items like subscriptions, impulse purchases, or frequent takeaways often fall into the “wants” category and can be cut back.
4. How can I stay motivated to track my spending?
Make it a habit by setting daily reminders or tracking with a friend for accountability. Celebrating small wins, like reaching a savings goal, can motivate you.