Understanding spending

In order to get spending under control, my first recommendation is to understand where your money is going. I don’t have all the answers, because there are as many spending problems as there are people spending, but I have a few suggestions.

However many family members you have that spend the money that comes in to the family, that is how many ways the money is leaving your household. Lack of information is the biggest budget killer. Once you have the information, it is likely that many things will become obvious to you as to how you can control your spending. Without at least having the information, you don’t have much of a chance.

Get the information on your family’s spending first.

Credit card spending – if you have just one credit card or none, your job will be the easiest in this area. For whatever credit cards you have, get a way to analyze interest rates, payment rules, balances, balance transfer rules, deadlines, and penalties. Whatever you are most comfortable using – you could use a spreadsheet on your computer, or a paper chart – but get to know where your credit card problems and opportunities are. Once you do that, some answers may jump out at you. A lower interest rate card may accept balance transfers and you can get rid of some of the higher interest ones. If you just have one card, at a minimum understand the payment deadlines and the interest rate, so that you an hopefully pay it off before the interest rate penalties kick in. If you have just one card, the ideal situation is to use it to track your spending, BUT pay it off monthly before you have to pay interest on the balance.

If you have no credit cards but just a debit card attached to your checking account, be sure you have online banking so you can check your expenditures.

Cash spending is the hardest to track. At a minimum, start by saving EVERY receipt, every one, even if it is just $1 for a morning paper or a breakfast biscuit. Save the receipts in whatever way is easiest – stuff them in a pocket or a purse, at the end of the day drop them in a box and organize them when you get the chance. At our house, the box is right below the key rack, so our habit is to hang up our car keys, then empty our pockets into the tray. Later, I organize and analyze the receipts. If there are cash expenditures that do not offer a receipt – such as a vending machine purchase, really try to keep track in some way – write it down in a notebook or give yourself an allowance weekly.

In most cases, you will find that your problems are not lack of income – if you have an income, you can always have enough money. Your problem is your spending. Start by getting the information on WHERE you are spending, and then take the next steps to control the spending. Without the information first, there’s little chance of getting control.

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