Track every penny you spend
I struggled with debt for years. I couldn’t get a handle on where my money went. I made a decent wage, but I was always broke! Where did I spend it all? Then I read Your Money or Your Life and heeded the book’s advice to “keep track of every cent that comes into or goes out of your life”. The results were startling.
What does it mean to keep track of every penny you earn? Your Money or Your Life recommends that you keep a Daily Money Log. This log can take any form.
- a pocket-sized memo book
- an index card (or the hipster PDA)
- an actual PDA
- an appointment book
- a computer text file
- a checkbook register
- personal finance software
- a spreadsheet
The most important thing is to use the log. Every time you get money — whether it’s from a paycheck or a garage sale or picking up change from the ground — write it down. Every time you spend money — whether it’s paying bills or buying coffee or paying bus fare — write it down. Keep track of every penny that enters or leaves your life.
Tracking your spending helps to demystify money — you begin to perceive it as a tool. You gain a sense of power — you no longer feel that money controls you, but that you control money. Your awareness of your money habits is sharpened, allowing you to make changes to improve your situation. This is an essential money skill, and it’s easy. Try this for two weeks and you’ll find that it becomes second nature.
When you track your spending, it’s important not to make judgments. This activity is meant to describe your money habits, not to change them. (You do want to change them, of course, but that’s a separate task.)
Here are some things I’ve learned over the past few years of tracking my own spending:
- Be careful with transactions that are easy to forget. Some transactions — cash transactions, online transactions, transactions without a receipt — are quickly forgotten. Take special steps to remember these, such as…
- Get a receipt for everything. It’s easy to forget were you spent your money on just 24 hours later. Make a habit of putting all your receipts in one place so that you know where to find them.
- It’s best to process your transactions daily. I find this hard to do. I process my transactions weekly. If I go longer than this, something invariably gums up the works: I can’t remember a transaction, can’t find a receipt, etc.
- Make it a routine. If you get in the habit of tracking your spending, it becomes second nature.
- As always, do what works for you. No one system is perfect for everybody. The important thing is to track your spending. How you do this is up to you.
Here’s what works for me:
- I try to get a receipt for every transaction. If one is unavailable, I jot a note to myself as soon as I can.
- I tuck these receipts (and scribbled notes) into my wallet. My wallet essentially serves as my Daily Money Log.
- At least once a week, I take my wad of receipts and enter the transactions into Quicken.
This process paints a picture of your spending habits as they actually exist, not as you think they exist. You can use this information to create a budget. Or, at the very least, to serve as snapshot of where your money goes. Without this method, it’s difficult to know exactly how much you really spend on thneeds or zizzer-zoof seeds.
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There are 30 comments to "Track every penny you spend".
One thing my husband got me in the habit of doing is taking cash out of the bank when I go shopping, and leaving the debit card at home. That way we both know exactly how much money has gone out of the account and there are no surprises at the end of the month.
I agree with peaseblossom above. We’re using that process for grocery shopping which has the added benefit of shutting down the extraneous purchases. The cash only method works!
Another tip from tracking spending and keep receipts is to designate one person alone to keep the receipts. We had quite a time for a while trying to find all the receipts between the two of us for a week’s worth of spending, not knowing that some had been filed away already and some were buried in pockets and purses while others we couldn’t remember if we had gotten a receipt on the item or not. Of course, if someone carries them all in a shirt pocket and the shirt goes through the laundry…well, that’s another story.
I tried this once. Once. I quit when I realized that I was doing Good Enough without tracking every last penny, and that I was taking up brain cycles that could be used for Stuff That Really Matters.
I am atypical here in that I use my credit card to buy just about everything. I check my account online several times a month to see how things are looking, and I adjust my spending behavior accordingly. I always pay my full balance every month.
I have never struggled with debt, so I have a hard time getting enough old-time religion to track pennies. I guess some of us are just naturally stingy, without having to use cash or track every penny.
Your comment was counterproductive. Although I am pleased that you do not struggle with money issues, this public forum is not your personal bully pulpit on which you preach to the masses about how amazing you are at managing your money. This public forum is intended to offer constructive advice, tips, and strategies to individuals on how to manage their finances. I truly hope you accomplished something significant, what with all the valuable brain cycles you saved by being such a savvy spender.
I am just starting to do this, and decided to use a couple of free tools.
The first, for recording expenses on the go, is a nice little 8-page customizable notebook I make myself from a piece of paper–look at http://www.pocketmod.com.
The other is http://www.clearcheckbook.com, an online tool for tracking checking/cash/credit inflow and outflow.
I do this, but i don’t keep track of the change. if i buy somethin for let say, 1.25 and i pay with 2 singles, i’ll put down 2 dollars into my MS Money register. If i pay for it with a single, and a quarter, i put down one dollar. makes it easier to remember…
I track everything I buy, even a singel gum.
I put everything in an microsoft excel dokument I have created.
But I want to take it one step further. I would like to make an datebase in microsoft access, so I could track in whish store i save the most money. Does any one with the same intrest that is advanced Access users???
SAVE MONEY, GET RICH
I’ve done this before, but have fallen off the wagon. I rely too much on my online debit card reports. Actually recording how much I made and spent made me much more aware of my money. Consequently, I saved more money. It’s a hard habbit to aquire, but one that pays off big time.
I’ve done this for almost 8 years. For me what made it easy and tolerable is to round to one significant digit (if I spend 7.14 I remember 7.2). Even though I am now living a bit less hand-to-mouth, it’s really valuable (and feels great) to know my spending trends. For the last few years I’ve done as much as possible of my spending with my paypal debit card, run as a credit card (for the 1.5% cash back, which really adds up for me) — but this method makes me easily keep track of all the cash stuff also.
Also the way I’ve done this is on a PDA, and I don’t wait (I do it instantly, which for me is the only way to be accurate). This becomes a habit very fast, especially if you establish conventions — for example, before I can start to eat the food I bought with cash, I will take a second to write in what I spent on it.
I have tracked every penny several times in my life, and always stopped after several months. It isn’t that I find it onerous or unproductive, it’s that I’ve always been dragging my wife along and become worn out by feeling at odds with her. I recently concluded that despite being in the same financial boat, we hadn’t communicated very well about our financial destinations and were rowing in circles.
At the beginning of this month we started tracking again, but this time was preceded by several family meetings at which we discussed the year’s likely expenditures and the implications of those expenses. We were trying to draw up a comprehensive budget, but we knew we were missing some of the cash flow. So we agreed to start tracking every penny to find where that missing money went. This time we have shared goals of finding and minimizing expenses and maximizing net cash flow, we have an aim to “Get Rich Slowly”. I hope we’ll make it stick this time, because I know it will help us succeed in our goals.
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Wishing you a prosperous future
Daiko
In this site, you will get your money tracked http://www.moneytrackin.com/
Here is a simple way to track everything: I use a debit card to pay for everything, even if it’s just a liter of milk. Every month when I get the statement from my bank, I type that into MS Money (no electronic import from banks in Austria) and categorize the items.
Avoid cash if at all possible. More debit card use = less paper need. As it is, my wife and I spend a certain amount of cash and have little idea where it went 🙁 But everything that we can pay with plastic is nicely logged 🙂
The next step would be to only give yourself X amount of cash allowance for the month. If you get by with it, decrease it next month. Works wonders.
Currently, YNAB seems to be working for me.
http://www.youneedabudget.com/
I’m currently evaluating it, and it’s proving worth the $39.95 to pay for it (my dad offered to pay for me =) I’ll have to hassle him about that after he gets home).
So far, it’s been useful in telling me how often I visit the same store/type of store during the course of one day, due to having no life (that’ll be rectified as soon as I start my new job! :D), and nothing better to do besides window shop and spend actual money (oh, and waste gas).
I had forgotten about the “tax yourself” thing. I think that outta help me stop spending as much money. I’ve decided to start taxing myself 15% on things, and I’m starting with all of today’s purchases.
For all of today’s purchases, I have $2.95 going to my “buffer” savings.
For Saturday’s purchase (gas), I have $5.19 going into my “buffer” savings (Saturday as in this upcoming: Sat/03/15/2008).
Currently, I’m below zero in cash at the moment, but I’m expecting money to come in (and that money is what’s going to fuel paying off the buffer tax and the gas =)).
Part of the YNAB plan is to put in the cost of what you need to spend money on every month (like you said). I looked at the gas prices last night (since I know I have to fill up soon), and I “jacked up” the price by 10¢, to count for a possibility of inflation.
I’m a new driver/tank filler, so to be honest, I’m not sure how fast inflation goes up/down, but I’m taking a guess that I ought to be pretty safe tacking on the 10¢. I have yet to figure out how much money I should be budgeting towards gas, since I have yet to have a “typical” tank, and thus don’t know how often I’ll need to fill.
I, too, have found comfort in doing huge wishlists. Mostly, I find that I really don’t want the item itself. I just want to spend the money. Yet, for some reason, I can’t just buy a 30¢ pack of gum every time I get the urge, in order to save more money, instead of wasting it on crap I want that I’ll never use. The idea of having a Smart Phone, iPod Touch or a Pocket PC is currently lingering on my mind. I’m mentally rolling my eyes at myself, because I logically know I’m never going to use it, or if I do, I’ll use it a total of 3 times, and then it’ll collect dust in some random corner of my room (assuming it doesn’t get destroyed in the process of collecting dust). At the same time, my inner whiner, is all “but I neeeeed it!!” and is ignoring the fact that when I get home, I don’t even bother bringing out my regular paper notebooks that have my To-Do List on them, and if I don’t use the cheap alternative, why bother buying the expensive alternative?(closet Luddite, ahoy!)
Damn that inner whiner for having no common sense (though, she’s rather amusing/comical, but only when I don’t give into her desires).
By the way, my last big sort-of-kind-of impulse buy was RAM for my computer.
I had been meaning to upgrade the RAM on my computer for a while, because it was becoming increasingly clear to me that 512MB was rather obsolete (damn you, Mr. Palmer!).
Now, I’ve often had a yen to upgrade my computer. Usually this yen comes about as an impulse, but my computer genuinely needs these upgrades (well, in my opinion, anyways). I still want to upgrade my 40GB hard drive, my 1.4GHz CPU and my CD-RW/DVD drive, but those will probably wait a bit and are stories for another time (after I’ve bought the replacements, LOL!).
Anyways, within the last month, my laptop’s adapter broke. Being a power user when it comes to computers, you can imagine how annoyed I was at having to use Win98 (I couldn’t install any cool software! That made me a bit sad).
I bought a cheap adapter replacement for my laptop. It arrived, and didn’t work. One of the metal stick thingys was loose. So, I turned to Dell, since the adapter that broke was still under warranty. They said they’d ship it, no big deal.
During this, I was dreaming about trading in my laptop for a desktop. I ultimately decided against this because 1) dad would have to pay for a lot of the desktop 2) trading in my laptop for any money seemed next to impossible, since it’s “ruined,” because it doesn’t look so pretty and 3) I’m not willing to give up my laptop yet (I only get an allowance of $20 a week. I imagine that’ll be one of the things dad and I start talking about, when I start to get my “regular” paycheck (assuming one can have a regular paycheck when one is in retail).
So, I figured I’d look into options for upgrading the computer I’ve already got. Went to WalMart’s website, and they’re selling RAM for $9. “What a deal!” I thought. I went to go buy it, but oh, wait! No free in-store shipping brings the cost up to $16 or $17.
Yeah, not happenin’. As it turns out, I decided to sell a ring on Sunday last week (03/09/2008). I managed to sell it on Monday (03/10/2008), and had enough money from the sale that I decided to buy some RAM (I have yet to be able to control my money spending, otherwise, I could’ve bought more RAM aggges ago!).
So, since I had enough money, I toddled off to Circut City. Or maybe it was Circut City? Whatever, it was the red store.
Anyways, I discovered that I had enough money that I could by 1GB of RAM! I was all “:O WIN!” cause it was on sale. I looked to see if I had enough to upgrade to 2GB of RAM (because how sweet would that be?!), but I didn’t have enough.
That was fine with me, I was able to get my 1GB and I was happy with that. Come to find out though, it really is my CPU that’s a slow little bugger and the reason my computer kept freezing. Though, having the crapload more RAM does help, it doesn’t help half as much as I’d like (I still am able to get some unintentional lag times with some programs running, which is a bit of a disappointment).
I think my next upgrade will be the CPU, assuming Dell eventually offers an upgrade for it.
I pay everything with debit card. Everything gets logged in my bank account. Then I can copy & paste to my Excel/whatever file.
I’ve been tracking ALL my money in and out for just over a week and already it’s ingrained in my daily life.
I’m not yet ready to budget (since I need more information) but I have noticed that I’m already spending less. It’s probably the act of having to put _more_ entries in each evening that stops me spending!
Here’s the only way to track our finances that’s worked for my wife and I (and we’ve tried using quicken and recording everything in notebooks too):
1. Pay by debit card for anything you can (that way the entry is logged on your bank statement).
2. Download your statements from your bank’s website in excel or csv format
3. put your statements into a spreadsheet (just keep adding them to the bottom of one long list)
4. Add a column for the month
5. Add a column for the category
6. Fill in the month and the category for each entry
7. Make a pivot table with the categories as the rows, the months as the column and the amount as the data. (search for ‘excel pivot table’ on google for help).
This shows you how much you spent in each category each month.
For us, it’s the only thing we’ve managed to keep up over an extended period of time because it’s very little work – you basically just have to fill in the categories.
Nice tips you have shared, here is my method.
One method that successfully worked for me and my wife was to have budget buckets for monthly items like groceries, entertainment etc. We had envelopes with the spending money for groceries, movie / DVD rental, eating out etc and used cash from this bucket. Some months we had carry overs, and sometimes we forced ourselves to save up for a splurge.
Since we are spending from a fixed budget, we know we are not going to exceed the pre-set amounts, which you can tweak to save more or less as you manage. The key is to start using a method and sticking to it. It will need refining as you go along using your method.
Our biggest saving comes from cooking at home and brown bagging our lunches, and eating out once or twice. This not only helps to save, you are also eating healthier when you cook at home.
While we stuck to the plan 95% of the time, both of us knew that we have room once in a while to ignore the plan. Our cars were the first things to get paid off with what ever extra cash we could scrape up. We never carried any credit card balance, and although we used credit cards, it was mainly for items like gas, electricity etc.
Do you need to keep a receipt if you use a debit card? I check all my transactions on my online banking
We recently launched a free web app to make managing money really simple. The site is http://yourdough.com. All comments are most welcome.
Recurring monthly charges that are deducted from your banking account or credit card can go unnoticed and leak money from your account.
I finally managed to track my expenses with the help of my iphone. Used a free app called Cut Expenses. Look it up on itunes. Very easy to track expenses on the go.
Back in the 1980’s with 2 children under the age of 2, I learned how to keep track of ALL my spending. I finally learned how to save $5 a paycheck until it didn’t hurt, then increased it month by month. I have had Christmas paid for each year since and now we save monthly for other things. Keep track of your pennies spent, you will finally learn where they are going.
We have been tracking our expenses for 18 months now with Quicken. Except for Gas and Groceries (cash only budjet) all our expenses are with Debit Card or Credit Card (hate those). Once a week we sit down and go through the numbers (Quicken offers multiple reports that one can customize) both in terms of Income/Expenses and Assets/Liabilities. It is rewarding to know where all the money went! And ever more when it sticks, ie our debts have decreased!
I’m reading a lot of people here who have an issue with this. Holy Crap, how hard can this be? It’s not! And what’s with the rounding? Just write down the correct figure, it’s not hard.
Just carry a notebook with you and either tuck your receipts into it in the store and write it in the log afterward or actually write the amount down at the register. It’s no slower than writing a check would be.
Come on, this is easy. If you think it’s hard you must not be serious about knowing your financial situation.
I agree with”Steve in W MA” I have been budgeting for over 10 years but still am struggling with where my money went. I started tracking my money with a pen and a note pad and on the 1st day I saw a gaping hole in my spending. It was a real eye opener. Previously using technology to track my spending, in a 10 year time span I never noticed this hole in my spending. So the only way I will track going forward is with pen and paper only!
I’ve been using a program called Chext (chext.net) for a few months now and it’s been GREAT! It’s a pretty simple system but it has some nice features. I don’t have to carry a little notepad with me, I just use my phone and text my spending into Chext. Chext does the math and then returns my new balance. One of the cool features is that I invited my wife into the system and so when I text something in, she sees it and our new balance — and vice versa, obviously.
It helps to reinforce us and remind us that we need to track our spending. Anyway, it’s a great little system and I highly recommend it!
I am trying to set up a budget for my wife and me. What do you think about the level of tracking on who spends what? I’m just talking about the variable expense areas that tend to have some individual spending like eating out, clothing, entertainment, etc.
Two suggestions for preparing for retirement. 1) Don’t carry a lot of money with you. 2) Have the maximum amount of money deducted from your paycheck to fill the 401 and/or IRA pots and live on the rest. Never withdraw money from savings plans as you will never recover those deductions.
Follow The Golden Rule of Investing. “Save as much as you can as early as you can.” The operative word is ‘early’.