Where Does the Money Go?
Have you ever gotten to the end of the month and wondered where all the money went? Maybe you think back on what you bought, but you can’t recall any super big expenses — or at least not enough to account for all the money you made.
So where does the money go? If you don’t know, it’s time to find out.
It starts with paying attention
Paying attention is key. If you want to know where your money is going, you’ve got to watch it head out the door. Ideally, you’ve got to have a plan for it so that it doesn’t just wander off and get into trouble. You want it to go where you want it to go.
That means having a system in place to track your funds. The more frequently you use that system, the better — because more frequent checks mean fewer opportunities for things to go amiss, and more opportunities to course-correct if need be.
A wake-up call
If you’ve never tracked your spending before, you may be in for a bit of a wake-up call. But don’t let that scare you, because it could turn out to be an awesome thing.
For example, suppose you’ve been wanting to take a trip somewhere, but you’ve never been able to get the funds together. If taking a look at your spending caused you to find an extra couple of hundred bucks a month, it wouldn’t take long before you could schedule that trip instead of having that money disappear into the unknown.
So how do you figure out where your money is going? There are three basic methods.
Method 1: Use pen and paper
This is just what it sounds like. When you buy something or pay a bill, write it down right then — or at the very least as soon as you get home. You can use a notebook, a piece of paper taped to the fridge, or anything else that strikes your fancy.
This is the method I first started out with, except I used the back of the receipt for whatever I’d just bought. I didn’t even total up my expenditures at first — I just wrote them down and threw them in my purse. Somehow the act of writing them down caused me to think about my purchases long enough to start reconsidering many of them before I made them. Eventually I moved on to totaling things up.
Method 2: Use a spreadsheet
Spreadsheets can automatically add things up for you and sort them categories of your own devising, which can come in pretty handy. Once again though, you’ll need to write down your expenditures in it for it to work.
Spreadsheets are nice because you can track expenses over time, in addition to doing so by category. It’s also easy to see trends if you’re into things like that. I track my income as well on the same spreadsheet — in effect creating a running income & expenses report. Don’t have Excel? Neither do I. I use Open Office for mine. Google Drive is another no-cost option.
I’ve used this method for many years and find it the most effective for myself. I typically enter expenses every 1-2 weeks, although I did so much more frequently back when I was paying off debt.
Method 3: Let someone else track it for you
Many banks and credit cards will categorize your spending for you and allow you to see reports. (If you only use your debit card to buy things, this could even be as simple as spending 2 minutes a day logging into your account and reviewing the previous day’s transactions.) Of course there are also apps out there that well track your spending for you. (See this New York Times article for reviews of a few of them.)
Letting someone else keep track of your expenses for you is by far the easiest way to figure out where your money is going. That’s the upside.
The downsides are that it’s also the easiest to ignore (since you don’t have to do anything to make it happen) and that advertisements and upsell offers often come along for the ride. (“We thought you might like _____.”)
No matter which method you choose…
No matter which method you choose, considering asking yourself one question as you review each expense: Was this worth it to me and my family?
If the answer is no, that’s an area where you’ll probably be better off reducing your spending in some way. If the answer is yes, your money and values are likely in line. And that’s a good thing.
The question also helps prevent something that stops a lot of people from examining their spending: the tendency to beat ourselves up over things we’ve done. If you don’t like what you see, don’t give yourself a little lecture. Instead, make changes, even if they are gradual. (Gradual changes may even be easier in the long run.)
Knowing where your money goes is a great tool to help you keep (or get) your financial life on track.