Where Did It All Go? A Guide To Managing Your Spending

 Managing how much you spend, and what you spend your money on, are difficult things to master. We can think of a number of reasons why you want to track your spending: you want to make cuts so you can save more, pay down debt or stop taking on debt. Even if you’re a savvy spender, in that you have the discipline not to overspend, you should still have an idea of where your money’s going. Do you ask yourself, “Where’d it all go?” We’ll help you find the answer to this question by providing a guide to managing your spending.

Technology is on our side when it comes to tracking our spending. But some of you will prefer putting pen to paper and doing the math yourselves. For a more “hands on” approach that puts your spending in perspective, try this exercise originally presented by The Simple Dollar:

Step 1 – Print your credit card statement. This may sound simple but most of us have gone green by switching our statements to “paperless.” This means you can find your statement in your online banking. Print it from there and let us begin!

Step 2 – Grab a pen, preferably red. An accountant would never use a black pen to identify overspending.

Step 3 – Go through the purchases on the statement, and put a “+” sign next to everything that was absolutely necessary for you to spend your money on. It could be a bill, groceries or gas.

Step 4 – Go back to the top of the statement and look for any unnecessary spending. When you identify these, ask yourself, “Was it worth it?” It might have been a pricey dinner or a few rounds at the bar. If you feel that you got some fulfillment out of this expense, then don’t mark anything next to that purchase.

Step 5 – As you begin to identify unnecessary purchases start by asking yourself, “Was it worth it?” If the answer is a resounding “no,” then put a “-“ sign next to it.

Step 6 – Start at the top of the statement again, and see if you can find something that you can’t identify. Chances are if you don’t know what it is, then it’s as forgettable as it is a waste of spending. Put a “-“ next to these (just be careful that it’s not a bill or something necessary that you just don’t recognize).

Step 7 – Add up the dollar amounts of every item with a “-“ next to it. The number you come up with is how much extra, wasteful spending you’re conducting every month. We could list the things you could be doing with that money instead (we couldn’t help it: save, pay down debt, invest, put money into your home, add more to retirement, etc…), but the bottom line is at the end of the day, your financial picture will look a lot better if you cut these purchases out.

The above method is a great exercise for folks who are more “hands on.” But a lot of people prefer automation and using the wonderful world of technology to track their spending. Personal finance apps are very popular, so we took a look at some of the features in a couple you’ve probably heard of.

Mint – Mint is a very popular app, and with it’s easy-to-navigate User Interface (they provide tutorials), we just had to mention it. Mint has many categories for your spending and does the dirty work for you by breaking it all down. Link your checking and/or credit card to Mint and it will identify how you spend by categorizing your purchases.

Set a goal with Mint in each category, and at the end of the month, you’ll be able to see how you did. The best part is, Mint will send you alerts when you’re approaching your goals. At that point, you can tighten your belt and maybe pass on a thing or two.

Dollarbird – This is another very popular spending tracker app. It’s easy to use and provides many of the same benefits as Mint. The predominant feature in this app is the calendar. If you anticipate a major expense coming up, you can input it into the calendar. That way you can plan ahead of time how to fit that expense into your budget.

further reading – 12 Free Apps to Track Your Spending and How to Pick the Right One

Banks – People who are wary of sharing their account and financial information with a third party should try using their own bank's online banking system. It has just about all the features provided by mobile apps, with the added benefit of full security from a financial institution.

Some apps will only let you track so many accounts before they start charging you. If you keep all of your accounts under one umbrella -- that is, the same financial institution -- then you should just use your online banking. Many online banking spending tracking functions have just as good of a User Interface as any mobile app. They include colorful charts, a vast number of spending categories, and they give you the ability to set financial goals.

Your bank's mobile app will provide many of the same features as online banking. Some will tell you, right on your account summary page, how much you spend versus how much you make every month. Your deficit is a plain number staring at you every time you check your balance. That’s fantastic knowledge to have!

If you don’t have all of your accounts under one umbrella, then this may not give you the most accurate picture of your spending. Banks are very sensitive when it comes to sharing data (as they should be), so they won’t be able to track a checking account at one bank, and a credit card at another. If you scatter your accounts to different financial institutions then consider a mobile app to track your spending.

We couldn’t help but end our discussion on tracking spending without bringing up a lost art: balancing a checkbook. It’s archaic and time-consuming, but ever since people stopped doing it, banks have collected exorbitant fees from overdrafts and people have put their spending in the “out of sight, out of mind” realm. That’s a dangerous approach when you have financial goals. So do yourself a favor: take our advice and track your spending. You’ll be happy you did!