Tracking spending; just reading those two words makes some people scared. “It takes too much time, it is impossible, it is pointless. “
Here is a big idea for you: Small behaviour changes will result in big savings.
The first thing we need to think about when tracking spending is our needs and our wants. A need is something essential (shelter, food, clothes, medication) while a want is something nice to have (electronics, jewellery, seasons tickets). Ask yourself; is this purchase a need or a want? There is nothing wrong with spending money on wants, but before we do this, we must be sure that we have enough money put aside for our needs.
Nobody is perfect and we all face temptations. Whether it is the new handbag, the toy for your grandchild or that case of beer on the weekend, we have all been there. The first step in curbing unnecessary spending is to be aware that you do it. Take a minute to watch this video and think about the unnecessary spending you may be doing.
Using ATMs from other banks, your daily coffee, ordering take out. What about your cell phone… the ring tones you’ve bought, the roaming charges and those picture messages, not to mention the high priced satellite TV you are watching. Point being, we all have our wants, weaknesses, habits or temptations that are costing us money. In thinking about what your wants are, ask yourself these questions:
• When does a want become a need?
• What motivates you to buy- advertising, friends, trends?
• Does the urge to buy die the next day?
• Do your purchases make you happier?
• What “needs” are now collecting dust?
• What can you learn to live without?
How much money do you spend on your wants which could be better allocated to your needs or savings? Although we can all estimate, there is only one way to be certain, and that is to track your spending. By tracking where your money is going, you will be conscious of your weakness or “latte factor”. “We’ve all go a latte factor, regardless of our income”- David Bach (www.fcac.gc.ca).
There are numerous tool and methods for tracking your spending. Today we will suggest two different methods, one for the non-tech person, and the other for the tech guru.
Notebook or Journal: Are you the type of person who likes putting pen to paper? Do you make lists or write notes? This method may be the best for you. Get a notebook or journal of sorts and place it beside your bed. Every night before bed take 1 minute to write down all the places you spent money that day and the amount spent.
Tim Hortons (coffee)- $1.65
Esso (gas)- $45.00
Bell Aliant (cell phone)- $85.00
Shoppers Drug Mart (toiletries)- $22.00
At the end of the month you are going to back track through the notebook and total how much money you spent in each category- coffee, gas, eating out, clothes, groceries etc. This method of tracking is simple; it only takes a few minutes each night. It is important to remember to write in your journal every night, as we often forget quickly.
Phone Applications: Are you always on your phone? Is it always within reach? Going to your App store and search spending tracker or budget tracker, it may be a lifesaver!
There are numerous free applications waiting for you. Be sure to read the reviews to see what app will fit your needs. Generally, many of these apps use the same principle; every time you make a purchase you pull out your phone and input the information: how much you spent, where and on what.
Some apps use the concept of envelopes. You can create different envelopes or categories and allocate a certain amount of money to each envelope. Throughout the month you will see how much of the allocated money you have spent from each envelope, and whether you are overspending or under spending. For example, you may notice it is only half way through the month but you have already spent three quarters of your grocery budget.
Additional ways of tracking your spending may include using desktop software, through online banking, or by saving receipts. It does not matter how you choose to track, what matters is that you start to become aware of where your money is going. This is a skill that you will carry throughout your life, and hopefully in the long run it will allow you to become much more financially stable!
For more information on this topic visit www.fcac.gc.ca , www.yourmoneyyourlife.org , www.getsmartaboutmoney.ca