Know where your money goes by tracking it.
I was a scientist during my college days - I studied Biological Sciences and spent a few years working in a research lab. One of the crucial things I learned during that period is the importance of measuring.
You see, if you don’t measure whatever it is you’re experimenting on, how will you know if it got bigger or smaller or better or worse? How will you prove or disprove your hypothesis? How will you know if the experiment is a success or a failure? More importantly, what on earth are you going to cook up for your thesis paper that's due tomorrow???
I didn’t end up becoming a professional scientist, but I did walk away with some ingrained habits that spilled into other non-scientific areas of my life, one of them being: finances.
I didn't always have a handle on my money and what was happening to it. When I first started earning and managing my own money, they would disappear without a trace. One day I would have $100, and the next day I would be left with $5, and I was always confused. Where did it all go? Why is there never enough??
Only when I started tracking what I was spending on did the picture become clearer. I saw how much I was spending on X, and on Y, and on Z. I noticed that I was spending way too much on things I then ended up not using, or that brought me a lot less pleasure than I thought they would. At the same time, I had thought of myself as a rather charitable person, but realised, through tracking, just how woefully little I gave to charity in reality. (Thankfully, I found a way to get better at this.)
Only by observing and recording my spending did those insights reveal themselves. Otherwise, I'd still be sitting here asking the same questions I asked ten years ago: Where did it all go? Why is there never enough??
Oblivion is bliss?
You too will learn a lot about yourself by tracking your spending, and sometimes the picture may not be a pretty one.
Someone I knew once attempted to track his spending, and it revealed to him just how much of his money was used for alcohol. He didn’t like what he saw, and stopped tracking, choosing to remain oblivious and to continue with his habits.
An unfortunate choice, but hey, we all write our own endings.
Some of you may be averse to, or scared of, tracking your spending. Just like the guy above, maybe you prefer not to know. This is entirely your choice, but do know this:
Until you confront your spending habits, you will never be able to overcome your financial issues. You cannot correct what you don’t know. And when it comes to money, what doesn’t get measured, doesn’t get fixed.
For the rest of us, the main reason we don’t track is not fear, but sheer laziness.
Still, laziness can be overcome, especially if something matters enough to you. I don’t exactly get excited about brushing teeth, but I still do it first thing in the morning and the last thing at night, and it is probably the same for you. Why? Because the results of that action (clean teeth) matter very much. So it has become a habit, and an almost automatic one. Sometimes in my half-asleep, groggy, not-quite-there state, I don’t even realise I’m brushing my teeth, but there I am, by the sink, brushing away.
Tracking your spending can be just like brushing your teeth - do it often enough, consistently enough, and you will do it almost subconsciously every time money goes out of your wallet. Get yourself to that point.
Take the following suggestions as starting points - all of us function differently, so customise it to your preferences, and be patient. If one method doesn’t work, try another, and again until you find something that fits you.
1. The End-of-day Recall
For the laziest of us all, this one basically involves you taking a few minutes at the end of each day to jot down what you spent your money on in the past 24 hours. Dedicate a page in your notebook or fancy Bullet Journal or iPhone notes for this purpose. You can do it in broad categories (food, clothes, rent, misc… etc), or you can go detailed (eating out, groceries, work clothes, casual clothes, petrol…etc).
Just add on the relevant amounts to each category as you spend day after day after day. At the end of the month, take a look at the resulting numbers and see if there’s anything surprising.
Pros: simple daily habit, doesn’t require fancy apps or technology
Cons: you may not remember everything you bought by the end of the day
Suitable for … those who don’t care to know the details, but just want rough estimations of where their money is going by eyeballing it
2. The List
For more details rather than just broad categories, and to know exactly what you’re spending on, keep a thorough list of each item you spend on. Every time you purchase something, jot it down somewhere.