Do You Know Where Your Money Goes?

Do you really know where your money goes each month? If you’re tracking your spending, you do. If you can’t say for sure, don’t automatically assume that your money just goes to “bills”. Chances are a surprising amount of it doesn’t.

And that’s why you should care

When you don’t know where your money is going, chances are you’re missing out on some great opportunities to buy and do some interesting things — especially if you’re living paycheck to paycheck.

In other words, you may be trading the things you really want for the things you want right now. But once you know where your money is going, you can redirect it to where you actually want it to go. You can do fun things. You can save for your future. You can get ahead.

The past

Before I started tracking my spending and budgeting, I’d “try” to save up money for things like trips and gifts, but would constantly come up short. I blamed that on unusual things that just seemed to happen each month, instead of acknowledging that I had no idea what all I was really buying.

If you’d asked me what I spent my money on at the time, I would have answered “bills, gas, and a little food”. In reality, it was probably more like car payments, car repairs, gas, insurance, a lot of food, and who knows what. (That was back in my early 20s, when I still lived at home, so I didn’t have that many expenses.)

Bills vs. spending

Which brings me to bills vs. spending. I felt like I had a lot of bills, when what I really had was one bill (car insurance) and a car payment. The rest was all just me spending money on whatever. When you can’t even remember what you bought, it probably wasn’t that important.

Also, it may seem strange, but I didn’t realize that bills are recurring monthly expenses that I had agreed to pay, and that spending was everything else I did with my money. (Yeah, I know, savings and investing could have been in there too, but they weren’t.)

Knowing where your money goes

There are some definite advantages to knowing where your money goes. Think of something you’ve been wanting to buy or do, and imagine being able to go right ahead without guilt — because you’ve planned on it and have the money available. Imagine getting a bill in the mail and not being stressed, because you were expecting it and already had the money set aside. Tracking your spending can be a giant leap forward toward getting there.

If you haven’t tried it before, give it a shot for one day and see what you think. Just write down everything you spend money on, and how much it was. It’s a few seconds that can change your life.

If you track spending regularly, what benefits have I missed? What has it allowed you to do? Leave a note in the comments — I’d love to hear your experience.