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Track Your Spending: The First Battle In The War On Debt

in Money Basics

Track Your Spending
You don’t have to look like this guy to track your spending.  Anyone can do it!

Note: This is a post from Adam Baker, founder of Man Vs. Debt.

I hope you enjoy a look back at the very first post on Man Vs. Debt, which had 4 visits that day.

Tracking every penny you spend is the first step in developing both Financial Awareness and Personal Responsibility. In the War on Debt, these two skills are absolutely essential because they counteract two of Debt’s most deadly weapons…  Stealth and Misdirection.

Debt relies heavily on going undetected or under-the-radar.

Unsolicited credit card offers, no-money-down home loans, 90 days same as cash, and instant financing from car dealers all enable us to delay dealing with debt.  In fact, most people rarely realize the dire situation they are in until their various credit lines start to dry up. As long as we continue to get a steady stream of “pre-approved” credit card offers, the sun is shining bright.  When credit starts to dry up a little, you see a different side of the equation… “What do you mean I need 10% down to buy a home…  Where in the world am I gonna get 15,000 dollars!”

Debt feeds on our ability to easily become distracted.

After all, most of us work fairly hard, often times at jobs we simply can’t stand.  Our days begin hectic as we rush through our morning routines, opting for $5 coffee and McGriddles for convenience, but that’s only the beginning of our problems.  Once we get to work, we start the never-ending process of trying to get more and more done in less and less time.

Who has time to think about impending bills and cutting the cable package, when we are constantly worried about shouldering as much workload as we can in order to prove the company can’t afford to lay us off?  And once we get home from work, don’t even think about asking us to prioritize our financial affairs.  We need to vegetate in front of the tv, spend what little time we have once we recover with the kids, and then get to bed early in order to wake up early.

How can you fight back?…

How can you win the first battle in the War on Debt? Simple, track every penny you spend.  Notice how I said “every penny you spend”.  Usually, in our culture “Track Your Spending” means looking over your credit card statements whenever they seem a bit high for that month. If you’re like me you’ve already been there and done that.  It’s undeniably clear that process rarely leads to any lasting change.

I want you to commit to tracking every penny you spend for the next 30 days straight. Use whatever method you like.  I strongly suggest pen and paper at first.  Don’t get caught up making a 72 column spreadsheet with drop down menus for each budget category (been there, done that).

These types of toys are really neat, but are not even close to essential to this process. In fact, I wouldn’t even categorize any of your spending.  We don’t want to take you from zero to CPA in 48 hours. All you need is the Date, Item, and Amount.  The more simple you make this process, the higher the probability you will succeed.

Develop a nightly routine of recounting your day’s worth of expenses before going to bed each night. I’m not asking you to stress yourself into a lack of sleep. Simply carve out 15 minutes each day to recount expenses throughout the day. Did you buy breakfast, hit Starbucks before work, eat lunch out, afternoon vending machine addiction, renew a parking pass, pay tolls on the way home, fill up the tank, stop for dinner at subway, and don’t forget about those 3 Ebay auctions you “won” earlier that evening!

It is important to do this each and every evening.  It really doesn’t take long at all… pop open excel or a notebook and write down your expenses for the day.  Again, hopefully you can carry a small notebook to jot them down when they happen.  You also might have receipts in your purse or wallet to help jog your memory.  No matter how hard you’ve worked don’t convince yourself you will do it tomorrow.  It is exponentially harder to remember today, tomorrow.  The more simple you make this process, the higher the probability you will succeed.

Why 30 days?

There are a million resources available out there for why 30-days is a great time period to develop a lasting, sustainable habit. In addition, 30 days will give you a fairly accurate view of the amount of spending you do in one month. Because our society has chosen to embrace a system where the majority of expenses are billed monthly this has great benefit when it comes to budgeting later.

Based on my experience, here’s the normal progression through the 30-days:

  • The first couple days: You will start off being annoyed, after all who wants to carry around a little notebook or wait for the gas receipt to print out so you know the exact amount. However, you’ve taken on this new challenge so there is some excitement there that helps motivate you to continue.
  • Days 4-7: The annoyance slowly fades away, as it becomes more and more habitual. The initial excitement has dropped a little, but since you’ve developed a little bit of system it’s easy to continue the process.
  • Week 2: You are actually starting to enjoy reflecting each night on the day’s events and spending. Actually, reflecting on each day seems to help you plan the next one a little better. You’ve tuned your system for recording, but are annoyed you’ve already used up 10 pages in only two weeks accounting for all the random places you spend money.
  • Week 3: Things are really starting to click. You don’t even notice collecting receipts and jotting the purchase into your pocket notebook seems like a natural extension of every transaction now. You’ve caught yourself avoid a little spending here and there just because you knew you’d have to write it down. It feels good to have the accountability even if you only saved 75 cents from the office vending machine.
  • Week 4: You are hungry for more. You’ve almost got a month’s worth of spending in your binder or on your computer screen. You’re a little embarrassed that you’ve spent more eating out than on groceries. In the past starting a budget from scratch has been nearly an impossible task, but now you can start to see how you could piece on together. Most importantly you feel much more aware of your financial situation.


Have any of you tried this type of 30-day challenge before?  Did your experiences tracking every penny you spend follow the same path I just outlined?  Have any tips and tricks you learn that could help other readers? 

Comment below and let everyone know your own experience.

{ 13 comments… read them below or add one }

Kosmo @ The Casual Observer May 27, 2009 at 8:49 AM

I’ve done this for short periods at home, and I do this religiously when on vacation. It seems that it’s very easy to have a vacation blow its budget if you don’t watch it.

I also use Quicken to categorize everything and run periodic queries.

Kosmo @ The Casual Observer’s last blog post..$68 Property Taxes?

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Baker May 27, 2009 at 12:50 PM

Kosmo, I’m surprised you don’t do this more consistently. Your analytical nature would probably lend itself well! You should try it again!

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Kosmo @ The Casual Observer May 27, 2009 at 1:36 PM

Honestly, we don’t burn through much cash any more, and the checks and credit card charges are easy to track after the fact. We do allocate the cash to guesstimated expenses in Quicken, though, and I doubt we’re off by more than a few bucks every month – it’s obvous where the cash is going.

Yep, I’m definitely analytical. I have a few spreadsheets stashed away on the hard drive :)

Kosmo @ The Casual Observer’s last blog post..Sleep less, live more years

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Paul @ FiscalGeek May 27, 2009 at 10:46 AM

Tracking and budgeting has been the key to us winning financially. I may have gone a tad overboard but I’m trying to rein it back in for my wife’s sake. I look forward to paying bills! I can look at my spending graph for the month and smile because I know where my money is going, because we told it where to go. If you get anything from all of the Personal Finance materials out there to me this is the lynch pin.

Paul @ FiscalGeek’s last blog post..A Low-Tech Pocket Budget System

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Baker May 27, 2009 at 12:54 PM

Paul, I’m exactly the same way right now. I’ve trained myself to enjoy some of those mundane things that drive people crazy!

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Matt Jabs May 27, 2009 at 11:08 AM

The greatest motivation I found when first starting out was to figure out how much interest my debt was costing me each month in order to establish a proper relationship with my debt

Matt Jabs’s last blog post..Financial Philosophy & Sacrifice to Create Wealth & Live Off Your Interest

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Baker May 27, 2009 at 12:56 PM

I’ve done that calculation on my student loans, but it made me puke. I try not to look at that number anymore, although it was effective at jump-starting me into action!

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DD May 27, 2009 at 11:52 AM

I first started doing this 7 years ago after I read “Your Money or Your Life”. I tracked everything for about 2 years, then stopped for 4 years.

When I started blogging last summer I started the tracking again. I post the results every month. Let me tell you it’s a real eye-opener!

http://www.thehappyrock.com/2009/05/05/dds-monthly-expenses-april-2009/

DD’s last blog post..4 Simple Tips To Improve Your Wealth Building Skills

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Baker May 27, 2009 at 1:00 PM

Your Money Or Your Life is what got me tracking spending, as well!

We have slumps where we don’t stay on top of it like everyone, but it just feels so much better to stay on top of things!

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Clair Schwan of Frugal Living Freedom May 29, 2009 at 10:47 AM

These are good ideas. Before you can fix a problem, you must be aware of it. Sticking something in your face keeps you aware. You just can’t ignore it anymore. Once you’re aware, then you can take action to change what you’re doing.

If we all held onto our trash for weeks on end, we’d see that we have lots of it. We’d be much more aware of how many cans and bottles and boxes of stuff we are consuming and throwing away.

The same concept applies to spending money. If we can make ourselves more aware of what we are spending, then we can combat the problem because it’s no longer out of sight and off the “radar” screen.

Clair

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Baker May 29, 2009 at 3:19 PM

You bring up a great point about our trash. We’ve been doing a little bit better in this area, but still have a long way to go!

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Brian Gosur July 11, 2009 at 11:43 PM

Awesome blog. I especially like the part about keeping track of what you spend. Nobody does that anymore.
I was running an analysis for a client of mine, and they had no idea what they spend or how much they have. They just live week to week.
We need educational blogs, like yours, to reteach people how money works.

Thank you

Brian
.-= Brian Gosur´s last blog ..Loan Modification Strategies To Help You With Debt =-.

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Eric Wentworth July 17, 2011 at 4:35 PM

I’ve tracked every penny our family has spent for the past two years. We get receipts for everything. These go into a manila file folder. On the front of each folder are each spending category (groceries, gas, dining out, rent, etc.). Each expenditure, even the smallest, is listed with the name of the place and date (e.g. under Groceries it might be $34.55 Safeway June 18.

We then track the total expenditures each month. These are analyzed to see where they can be made more efficient. The totals are transferred to an Excel spreadsheet and compared month to month to see how we’re doing.

Knowing exactly where we are financially is a HUGE step to feeling confident about our control over our money. It also makes it very simple to figure out our taxes at year-end. I believe this has been one of the major steps we’ve taken in successfully handling the devastation of the financial meltdown and continued hardship in the economy—along with taking other positive steps such as creating an ongoing, consistent exercise program so we are able to reduce medical costs and have more energy; reducing TV viewing so that our time is used more productively; eliminating or reducing unnecessary things from our life (e.g. comparing and lowering cable TV costs, insurance costs, household purchases); selling stuff we don’t use or need to bring in extra cash and lighten up our load of “things” that weigh us down; and finding new creative outlets to build new careers that will meet the changed environment of the working world.

It’s a whole new world out there. Anyone who doesn’t change to adapt successfully to it will experience many hardships in the future.

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