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Tracking Your Spending: Winning The First Battle In The War On Debt

in Money Basics, Pay Off Your Debt

Tracking Spending

This post has been updated and reposted! Check out the newest version.

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 if you will. 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 vegiatate in front of the t.v., spend what little time we have once we recover with the kids, and then get to bed early in order to wake up early, so we can stop by Starbucks on the way to work.

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 “Tracking 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 if ever 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.

{ 3 comments… read them below or add one }

Stephanie PTY March 29, 2009 at 12:58 AM

I started tracking my spending in January of 2007, and it’s been immensely helpful ever since. There were some bumps in the road, but I’ve managed to keep tracking it continuously since that time – I’m very proud of that. I really makes a difference, being able to say I know exactly where my money has gone for over two years! Knowing the past really helps you to be able to plan for the future. What’s the average that I spend on gas every month? Let me do a quick calculation based on exact data… :)

Stephanie PTY’s last blog post..Upromise Tuition Tales: $10,000 Giveaway

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Baker March 29, 2009 at 7:58 AM

Stephanie, it’s really hard to explain to someone who doesn’t track just how much it changes your perspective on things. We’ve not been tracking quite as long as you have but have crossed the year threshold. It’s hard to see how anyone could fail financially with that level of commitment to understanding their habits and goals. Great Job!

P.S. I’m thinking of video ideas for your Upromise post. I’m not super talented a making videos, but I might give it a shot for a chance at $10,000 student loans paid off!

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kyla May 18, 2009 at 11:26 AM

This is a WONDERFUL, WONDERFUL post, and this sort of thing is right down my alley! I’ve been tracking everything monthly, but doing this each day sounds SO much better. I’m off to find my notebook ledger and I’ll be starting a daily talley on June 1st! Thanks so much for sharing and for the inspiration!

kyla’s last blog post..The Simple Woman’s Daybook ~ May 18th Edition

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