Have you ever gotten $20 from an ATM and then wondered what happened to it? Start writing down everything you spend every day so you can keep track of where your money goes. Try it for a week, and you'll be surprised at how much you can spend on small things like coffee, eating out, and entertainment. Here's what you need to do:
Make a column for each day of the week, Monday through Friday, on a blank sheet of paper.
Put the piece of paper somewhere you can always have it with you, like your wallet or purse.
Make a note of every single penny you spend. This is very important, because if you forget to write down a coffee here and a soda there, you won't have a full picture of how you're spending your money by the end of the week.
At the end of the week, quickly put the money you spent on food, transportation, entertainment, clothing, housing, and other things into the following categories: Next, add up all of your costs in each group. Here's what one day looks like:
Monday
Food is $10.60 and coffee is $2.75.
Bus fare - $3.00 Getting around: $3
Lunch - $7.85 Entertainment: $2.50
Magazine - $2.50 TOTAL: $16.10
Next, find out how much of your money you spend in each category by dividing the total amount spent in each category by the total amount spent overall. Using the above example, I spent 66 percent of my money on food ($10.60 out of $16.10).
Once you're done with your calculations, take a close look at your analysis. Do you find anything surprising? Do small things cost you more money than you thought? Things like coffee, drinks, cigarettes, etc. can really add up over the course of a week. Think about it: if you spend $3 a day on coffee, that's $21 a week or $1,092 a year! Find these surprising places and look for ways to cut back on your spending there.
Keeping a daily spending diary is a simple way to get a handle on your spending and figure out if you have any bad habits. Also, keeping a daily spending diary will get you halfway to making your own budget. Next week, we'll talk about how to make a budget. Between now and then, congrats on taking an important first step! You will soon find out more about Your Money and You.
TIP: Keep a record of what you spend each day to help you save money. After a week, it should be easy for you to see where you can cut back on spending. The money you save will help you reach your goals, like starting a business, saving for your kids' college, buying a house, or going on a dream vacation.
