Know Where Your Money Goes
Keep Track of Your Expenses
Gaining control of your financial situation and using money to help you reach your goals is possible, but first you must recognize where your money goes. Evaluate your habits. Start by jotting down everything you think you spend money on during a one-month period. Next, make a list of what you actually spend during that month. Be sure to write down everything you buy and how much it costs. Include rent, car insurance, groceries, and even small purchases such as coffee or snacks.
To help you track your monthly expenses, download the Tracking Your Expenses Worksheet.
Plug Spending Leaks
Now that you know exactly how you spend your money each month, you've probably noticed areas where small amounts of money are disappearing. Examples of spending leaks include buying expensive coffee drinks daily, eating lunch out every day, and making impulse purchases. While it may not seem like you're spending much at the time, these leaks can add up to quite a bit of money over a month or year.
Once you've identified your spending leaks, you can determine ways to plug them by making small changes in your habits. For example, if you're buying lunch at a restaurant or cafeteria every work day, you probably spend at least $5 each time. That adds up to $25 a week, $100 a month, and $1,200 a year. If you weren't spending this money on lunch, you could use it to help accomplish your life goals, such as paying for your child's education or your own retirement.
Make a plan for controlling unnecessary spending with the Plug Spending Leaks Worksheet.