Know Where Your Money Goes

Savings Tip

Know where your money goes.

Clues

Do you earn a good income and at the end of the year ask yourself "Where did all my money go?" I can see you sitting there nodding right now. You can take comfort in knowing that you are not alone as this is a very common puzzle for people. "Where does my money go?"

So where does all your money go? Surely you can't have spent it all …. or have you?

The trick to being successful with your money is to have control over your money. To do this you have to know where it is going. If you don't keep an eye on it, it will run away and disappear into a black hole. There are holes in your wallets and purses that you probably just can't image being there. You have to treat each piece of money like a piece of gold that you don't want to let go of.

Here are some clues for you to consider so you can start to keep an eye on where your money goes

1. Ask yourself the question "where does my money go?"

• Grab out a sheet of paper and try and write down where you think your money may be going. 
  
  
  • What days of the week do you spend the greater amount of money?
  • What are you doing during these days?
  • Where are you when you do this spending?
  • How often do you spend money during a typical week day?
  • Where are you when you spend this money?
  • What loans are you paying back?
  • What fixed bills / commitments do you have to meet?
  • What deductions are being taken from your pay?
  • What are your weaknesses?
  • When are you most vulnerable to spend your money?

2. Look over your records

• Have a look through some of your bank account and credit card statements
  
  
  • What are you spending the bulk of your money on?
  • What is being withdrawn from your accounts?
  • What regular transfers get deducted from your accounts by direct debit?
  • How much cash is being withdrawn from ATMs?
  • How many Eftpos transactions are you doing?
  • What loan repayments are being deducted?
  • What is your greatest expense?
  • What sections of your expenses are consuming the most amount of your money?

3. Understand your bank fees and charges

• Have a look through some of your bank account and credit card statements
  
  
  • What sort of fees are you paying on your accounts?
  • How much are you paying for ATM withdrawals?
  • Are you paying to use other Bank's ATM's?
  • Are you being charged for late credit card payment fees?
  • How much interest are you paying on your credit card?

4. Try and identify what portion of your money is going on fixed expenses (such as bills and loan repayments) and what portion of your money is going on lifestyle / discretionary spending (such as groceries, entertainment, eating out, clothes).

• From the list you have written that identifies where most of your money is going break this down by
  
  
  • Noting on the list the expenses that you have to meet; such as bills, rent, mortgage payment, loan repayments etc
  • Noting on the list the expenses that are nice to have but aren't absolutely critical. We will call these lifestyle / discretionary expenses (such as groceries, entertainment, eating out, clothes).
  • How much of your money is being spent on lifestyle / discretionary expenses?
  • Lifestyle / discretionary spending is the area where most of the runaway money escapes from.
  • How do your lifestyle / discretionary expenses compare to the money you are spending on fixed expenses / bills?
  • Look for ways to reduce your lifestyle / discretionary expenses

5. Do up a budget

• Spend the time doing up a proper budget which will look at your likely future income and expenses
  
• A budget should be a thorough record of all of your expenses across all areas such as fixed bills / commitments and lifestyle / discretionary expenses
• Ensure your budget is realistic and achievable
• Limit what you spend on lifestyle / discretionary expenses as this is optional spending and an area that you can get carried away on
• Allocate money in your budget for all foreseeable expenses
• Set some money aside for emergencies
• Don't forget to provide money for items such as replacement of capital items such as buying whitegoods, repairs / renovations to your home
• In your budget put a portion of your money aside for savings
• In your budget include provision for funds to meet any goals
• If your budget runs into negative / deficit, then you will need to cut down your lifestyle / discretionary expenses or other optional spending until you reach at least a break even point

6. Look at your money habits

• Try and identify particular times where you might be a bit frivolous
  
  
  • When you are in a particular mood
  • When you have occasion to celebrate
  • When it is someone's birthday
  • During particular times of the year
  • Over festive seasons - Xmas / Easter
  • When on holiday / away for weekends
  • Out with certain friends / family members
    
• Think about your pattern of spending
  
  
  • Do you spend first and deal with the consequences later?
  • Do you shop around for a bargain?
  • Do you stop and think / sleep on it overnight before rushing into a purchase?
  • Do you ask for discounts off standard prices

7. Start to keep a record of what you are spending

• Carry around a little note book and make a conscious effort to record what you spend cash / money on over a period of time
• Fill in your notebook on a daily basis updating it as you spend cash / money
• Review your notebook at the end of the day / week
• Keep all your receipts and dockets in one central place
• Use a spreadsheet to track your expenses and bills
• Track your total expenses over a week, fortnight, month
• Really keep an eye on your cash as this is what will vanish - you break into a $50 and before you know it you have coins rattling around in your wallet / purse
• Analyse what you have recorded and try and identify particular patterns / habits
• Make a particular note of any areas you are overspending
• Don't stop doing this until you can say with confidence that you know where your money is going

8. Look for ways to stop the leakage such as

• Following your budget
• Using money jars / envelopes for different expenses such as groceries, eating out, hairdressing, clothes etc
• Using separate bank accounts for different purposes such as bills, lifestyle, holiday, savings etc
• Setting up automatic transfers to distribute your pay to separate accounts for different purposes such as bills, lifestyle, holiday, savings etc
• Giving yourself a set allocation for lifestyle / discretionary expenses each week
• Being strong and if you spend all your money one week waiting it out until the following week
• Paying cash for items and not using credit / debt
• Limiting the purchases on credit cards
• Using the Money Detective Budget Tracker to track where your money is going

9. Remove access to temptations

• Take the credit card from the wallet / purse
• Reduce the limit on the credit card
• Only keep minimal funds in accounts with debit card access
• Don't draw out large amounts of cash and keep it in your purse / wallet
• Stop access to any savings account via debit cards
• Remove some accounts from internet banking access
• Have your savings account with a different bank so you can't get internet access to it and put the money in your spending account

Motivators

Well this all sounds well and good, but what is going to make you get started today? Well hopefully the fact that these clues and tips are quite simple and easy to set up will give you incentive to start off today.

Take a bit of time out of your week to do your preliminary homework to this exercise and then once this is done, all you need to really do is go out there with a new awareness and consciousness regarding your money and spending habits. A great question to ask yourself each time you put your hand on your wallet / purse is "Do I really need to buy this?".

If you don't start today, where will you be tomorrow and more importantly where will you be in 2, 5, 10 years time. If you don't change today you won't be any different. You will be the same old you looking back and wondering where all those years have vanished and where all that money has gone.

You have the power to take charge of your life and only you can change yourself. Imagine how great it would feel to be empowered and in control of your money. No more stresses and no more worries.

You can stop that leakage today. You can capture all of that run away money. Imagine if you just found yourself an extra $100 per week by being in control of your money and not letting it escape into a big black hole.

If you multiply $100 out you could have

$ 430 a month
$ 1,300 a quarter
$ 2,600 a half year
$5,200 a year

Phew, this is a decent amount of money. By being in control of your money, it actually gives you more money back. You could have that holiday you have always dreamed of, you could pay off that credit card debt that has been hanging around, you could buy that boat or just put the money away into investments for the future.

Next time you hear the question "Where does your money go?" have a chuckle to yourself and smile. Because you will be in control of your money and able to answer "I know exactly where my money goes!"