Where's My Money ? - Expense Tracking

Today we’re going to take a look at creating a spending plan that can help you save money. Having a spending plan is a financial necessity. A well designed plan is shaped by your goal and financial resources and if followed faithfully it can help you manage nearly every aspect of your financial life.

There are several other benefits that result from creating an effective spending plan. You should be able to rely less on credit, build savings and be better prepared to handle financial challenges in the future.
There are at least four steps which are required in developing a successful plan.

Number 1 – You need to determine where your money is going right now.

Number 2 – Examine your current expenses and classify them as either wants or needs.

By completing these two steps you’ll have a good deal of the information you’ll need to adjust your spending plan over time. After all you just can’t create a single plan and hope that it works forever, change happens and therefore you must review spending plans periodically. I recommend once every quarter. Finally with your plan in place it will be a lot easier to complete step 4 Establishing and

Implementing your short and long term financial goals.
For the moment let’s focus on step one, Assessing where your money is going right now – As I mentioned, tracking your money is a must but many people take this step for granted. Unfortunately those mortgage or rent payments, utility bills and insurance premiums are only part of the story. What about the small incidental purchases you make every day. It could be a dollar here or two dollars there but because the amounts are so small they go unnoticed. Of course when you start to track your spending all these little purchases begin to add up.

Let’s take a look at our fictional spender Bob. Bob is like most of us; he has a very hectic lifestyle and has fallen in the habit of buying what he needs on the run. Each work day Bob buys a newspaper for .50 cents and breakfast for about $5.50. At lunch time Bob stopped at a local food store and grabbed a sandwich and a beverage costing him $7.50. As three O’clock approaches he often feels a little sluggish and what he does is step out to the coffee shop for a cup of Joe and a pastry costing him $3.50. To Bob none of these individual purchases amounts to very much, however these seemingly trivial expenses add up. When Bob begins to examine where he’s spending his money, he becomes painfully aware of just how much of these purchases are affecting his bottom line.

Daily Bob was spending $17; Over the course of a week, those expenses added up to $85; in a month $340 and over the course of an entire year Bob found that he spent $4,080.00 on newspapers, breakfast, lunch and has and his afternoon coffee break. After tracking his expenses for a few weeks  Bob become to understand just how much it was impacting his financial life and can implement changes.

Instead of picking up the newspaper every day, Bob relies more on the morning news and the internet to see what’s going on in the world. As for breakfast, Bob now eats a bowl of serial or oatmeal which he can make before heading out for the day. When it comes to lunch, Bob has embraced the art of brown bagging it. Finally for his afternoon coffee break, Bob sticks to the office’s brew and cuts out the pastries.

Tracking your spending is surprisingly simple, you can carry a pad with you enter your expenses as you make them or you can add them as a not on your cell phone. If you have an Iphone there’s probably an app for that, whatever method you choose you will need to be persistent.  You must know where ever dollar goes in a typical month before you go to step two which we’ll look at in my next hub.