How To Gain Control Of Your Spending

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Do you find that you never have enough money? Are you always falling short each month to pay the bills? Do you know where you’re spending your money? Are you living life with debt?

 

Did you answer yes to any of the above questions? At one point in our lives, we did too!

 

Our Past

There were many years our family also had these issues. For the longest time, we thought we were not making enough money. There were a short few years where we truly were not making enough money. However, when my SO and I both received raises and were bringing in more net income than ever in our relationship, we were still struggling. We started thinking that maybe we didn’t have an income problem after all!

After reviewing our finances, we learned we had a spending problem. We were maxing out our credit cards on everyday essentials as well as non-essentials. One winter, my SO got hurt at work and then got laid off for the season right after. This was unexpected and we were not prepared for it. We fell months behind on our bills which resulted in daily phone calls from creditors. It was an embarrassing and difficult time of our lives. We asked ourselves, “How did we get here?”. We made enough money to cover our monthly expenses and we tracked our spending, but we still were not able to make ends meet on time.

One day, we were taking a trip to visit family and Dave Ramsey’s podcast came on. After listening to a few callers, it was that moment that we realized that we were not truly applying the principles we had learned from his Total Money Makeover program years before.

Our technique for tracking our spending was completely a reactive experience.  This means that we were only tracking our spending after we had spent the money already. We were not proactively telling our money what to do. At this point, we realized we needed to make changes if we ever wanted to get out of our current situation.

 

Our Future

Today, we are on the right path to taking control of our spending, eliminating debt and increasing our income to gain Financial Freedom. However, it took work to get there as we had to work through and continue to work through different stages of money management. Before we could make changes to our finances, we had to understand more about our current state of finances. During this stage of taking back control of our money, we had to discover the following:

• Where we were spending all our money
• Why we were spending all our money
• Determining what our long-term financial goals were

Once we understood where our money was going, why we were sending it that way and what we really wanted, we could move forward.

Our next stage involved determining the areas that change needed to be made. With this information, we could then put the changes into practice by creating a budget for our spending. By creating a budget, we would be proactively telling our money where we want it to go in order to meet our financial goals. These small actions have led us to follow our long-term financial goals and beginning to control our money our way!

 

Are you ready to start seeing positive changes in your finances? Start taking control of your money today by following the process of financial discovery!

 

Determine where you are spending all your money

In order to take control of your money, you must first understand where your money is going. How do you spend your money: Cash or Card? How you spend your money will be a deciding factor in how you will need to determine where you are spending your money.

If you use a card whether that is a debit or credit card for the majority of your spending, you should be able to easily get your last statement from your financial institution. Your statement will show all your spending transactions in the last month except for cash spending. Grab a blank sheet of paper or open a new document in your software of choice to begin tracking your last month of spending. Better yet, download our weekly spending tracker to help you determine where you are spending your money.

For cash spenders only, you can still use the above options for tracking your spending. However, you will complete this task moving forward versus looking at the past month. Bookmark this post and come back in 30 days to complete the next two tasks involved in taking control of your spending. If your not a paper and pen type of person than you can track your cash spending using a digital app. There are many free apps available that help you track your spending. Below are four great money management apps that focus on tracking expenses!

• Everydollar
• Mint
• Wismo
• Empower
• Wally

It is good practice to get in the habit of tracking your spending on a daily basis. Many find it less overwhelming the more often you keep track of your spending. However, if your schedule does not allow daily tracking, then the next best is weekly. Tip for weekly tracking is saving all of your receipts and using a check register that way you can balance your spending on your designated tracking day!

After you have been tracking your spending for at least 60 days, you should begin to see trends in different categories. Now that you see where you are spending your money, it is time to start asking yourself why you are spending money in specific categories.

Determine why you are spending all your money

Determining where you are spending your money before determining why you spend your money will help you see trends in specific spending categories. Believe it or not, there are underlining psychological aspects that influence the way we spend money. Being able to identify where we spend our money can help give us an idea of certain underlining influences. When we understand the influences behind our spend, we can start recognizing triggers that pressure us to spend. When we can fully recognize our triggers we have a better chance of avoiding or fighting them.

Diving into these underlining psychological aspects can be a difficult task, but it is definitely worth it and necessary in order to truly change and cultivate the way we manage our money. There has been much research done on the psychology of consumer spending. Much of the research identifies very similar reasons as to why we all spend money the way we do.

Psychology Today released an article earlier this year on 10 different reasons that people spend too much such as shopping addictions, the art of retail therapy and mental accounting. We highly recommend you read this article with your own spending habits in mind. Have any of these reasons ever caused you to overspend?

This part of financial discovery may take some time to find your true answers. It requires really digging deep and being honest with yourself.  Identifying the reasons why you spend money will take some time and self-awareness. When we were in this part of financial discovery, we came upon a module by BalanceTrack that helped us become more aware of factors that affect why we spend money the way that we do.

Through the five short chapters we learned about the following:

• The emotional appeals that advertising uses to influence us to spend.
• The influence of friends, neighbors, and coworker’s financial lifestyles.
• The daily spending habits we may not put a second thought towards.
• The scenarios that may increase the risk of buying impulsively.
• The influence of sales and clearance sections on increased spending.
• The ways to improve mental health without partaking in retail therapy.
• The relationship we see between money and love.
• The relationship we may have between time and money.

This module really made us dive into our beliefs and behavior towards spending and where we are impacted the most. Once we recognized the influences of our spending, we could then start learning how to overcome them. We had a period of time where we avoided certain stores or sections of the store, we found an accountability partner to help us think twice and we found new activities that helped us spend less. If you need suggestions on how to avoid the pressure of spending, Chopra.com wrote a great article with some ideas.

Every person will be influenced differently in how they spend.  We hope that you found BalanceTrack’s module helpful in discovering those influences.  Once you have determined why you are spending all your money, you can move forward in the financial discovery process.

 

Determine what you’re long-term goals are

Does your spending align with your long-term goals? Do you know what your long-term goals are? Do you have short-term goals to help you reach your long-term goals? Long-term goals can be anything like traveling, buying a home, starting a business, becoming an entrepreneur, retiring by a certain age, or paying for your children’s education. Your goals do not have to be financially based, but most likely reaching your goals will involve some form of financial need.

Ask yourself, where would you like your financial status to be in a year? In five years? In ten years? Take as long as you need to think about your financial future. Once you have decided on your financial goals, write them down and organize them by the year length you would like to achieve them. Does your one-year goal, help you to reach your five-year goal? How about does your five-year finance goal put on the path to reach your ten-year goals?

Let’s say you would like to retire in ten years. Determine how much you need to live comfortably each year and then multiply that amount by how many years you expect to be retired. This is how much you should aim to save within the next ten years. If you have already started to contribute then subtract the amount you currently have against the total you need. The difference then should be divided by ten. You now should have discovered how much money you need to contribute to retirement accounts for the next ten years. From here you may discover that you have to make some financial changes in your current life such as saving more, spending less, budgeting or increasing your income in order to meet your goal.

The key to meeting your future goals is by determining what actions are needed to meet those goals. The actions can be broken down into small steps that are then aligned with your short-term goals. If you do not know how to reach your long-term goals, then seek out individuals who are living your current goals and discover how they got there. I have found many individuals who are willing to share their insight or direct you to resources available to help you. Do not be afraid to seek help in learning how to make and stick to financial goals!

Have you figured out how you spend your money currently? Do you understand why you spend money and how to prevent your spending triggers? Have you defined your financial goals? Are you ready to move forward in taking control of your money? 

 

Now that we have knowledge of our spending and our financial goals, we want to start making a plan that will align our spending with our goals. This is more commonly known as a budget. A budget is a tool that is used to create a plan of action for your money. Budgets give you the permission to put your money towards those things that are the most important to you.

Since you had previously determined where you were spending your money, you should have a good idea of some of the budget categories you need in your budget. You will also want to add categories based on your financial goals. Do you need some help determining the budget categories to put in your budget? Local First Bank provides a great article on personal budget categories and sub-categories to include in your monthly budget.

Our monthly budget is an ever-evolving plan as our goals and needs change from month to month. We have recently discovered an article on organizing your budget and it’s categories written by The Budget Mom. She provides some great information with examples for designing your budget categories. This article has had a great impact on helping us better organize our budget.

When you have determined your budget categories, it is time to start putting everything into a plan. Before each month, you will want to discover how much Income you plan to receive along with how much you will need to spend in each category.

There are many different ways to budget. Our personal favorite is the zero-based budget recommended by Dave Ramsey. You can learn more about this type of budget on his website.

No matter how you choose to actually budget your spending each month, the real achievement is that you are taking control of your spending by making a plan for it.

Related Posts:

• Gain More Control With These Savings Options
• Choosing The Right Financial Institution For You
• 4 Money Concepts To Know To Take Control Of Your Money

Have you started planning out your spending recently? How has your experience been? Are you on target to meet your financial goals?  We would love to hear how these exercises did or did not help you take control of your spending!