This is something that I recommend to everyone, and for some reason, the response is always the same: “Yeah, I need to do that.”
Don’t plan to do it. Don’t think about doing it. Don’t consider trying it.
Actually do it.
For an entire month (start today!), write down every single thing you buy. Don’t rely on your credit card statement; the act of writing down each decision will be more impactful.
Take a piece of paper and fold it down the middle, hot dog-style. On one side, write “WANTS” and on the other, write “NEEDS.”
Track every single penny you spend, so that after a full month, you can get a sense for how you’re really spending.
There comes a point where this type of accountability and self-awareness is no longer optional, and nothing forces self-awareness like writing “Blue Fish Sushi: $37.76” on a Tuesday night in the “WANTS” column after complaining that you can’t afford to invest.
If you’re wondering where this hard-ass tactic came from, take joy in the fact that my mom used it against me when I was a freshman in college: I came home for my first long break after being given free rein with my debit card for the first few weeks of college to “get acclimated.”
She had written down in tiny, precise lettering every charge from my debit card on a piece of printer paper. Three columns of charges spanned the front of the page, and I tried to defend myself: “I was buying stuff for my dorm!” “I had to buy books!” “There were parties, mom! I needed COSTUMES!” (Can you hear my shrill, high-pitched panic?)
“Katie, this page is just restaurants.” She replied flatly, referencing the three columns of what must’ve been at least 200 line items.
When it comes to financial screw-ups, trust me, I’ve been there – and while I loved making every excuse available to me for why I had no other option but to spend $800 per month at restaurants, ultimately, the truth was that I was bored, lazy, and bad at prioritizing.
Why this exercise might not actually be a kick in the nuts
If you’re struggled with your spending habits (read: ever gotten to the end of the month and thought, I honestly don’t know where all that money went), this exercise will be an eye-opening one – and not just for the reasons you might automatically assume.
In my experience, there are usually two revelatory outcomes:
In one instance, someone writes down everything they buy for a month and is utterly shocked at the way they blow through money. The amount of discretionary spending dwarfs their “needs,” and they realize – starkly – how much they’re wasting. This was my personal experience with tracking. There would be a point in the month where everything seemed to fall apart, and then the rest of the month would be a runaway freight train of late night food and Free People sales.
The other scenario is one in which the person writes down everything they buy and realizes that most of their money is getting vacuumed up by a few big expenses, like rent or their car payment. The “wants” column is paltry, and it makes them realize they could be spending their money in a way that actually enables more fun and fewer bills.
Why this works when other tracking softwares fall short
The short answer is, it’s too in your face to fail. If you tape this to your bathroom mirror or kitchen counter, you’ve got a daily reminder staring you down. It’s too easy not to open the Mint app or simply leave the spreadsheet unopened on your desktop. A piece of paper adhered to your kitchen table is a little harder to avoid – and if you still find yourself avoiding it, maybe it’s time to ask yourself a different question: What am I afraid of finding out?
The other reason this works is because it gives you a physical sense of control, and usually, control is the thing we’re trying to buy with all our wanton expenses anyway. Putting pen to paper in this way creates more of a tangible relationship with your financial behavior. It makes it real. Because so many of us insert our chips to access the world of consumer bliss, writing down everything you spend is a little like paying for everything in cash and coins – you’ll actually start to feel like you’re spending money again.
There’s a study that I think about from time to time wherein they measured someone’s brain waves when buying something with a credit card as opposed to cash: Turns out, buying in cash triggered feelings of physical pain in the brain. The credit card registered nothing psychologically.
Using a credit card is like spending under anesthesia, but I won’t go so far as to recommend you carry around a wad of cash and cut up your credit cards (Dave Ramsey’s got that school of thought covered). Credit cards can be an incredible tool, so my compromise is the physical recording. Keep your Sapphire card.
What to do afterward
Once you’ve got your page of transactions, get out the iPhone calculator and start totaling up categories. Do the big stuff first: Overall wants vs. needs. How did you net out?
Then, start color-coding. Grab some highlighters or markers and start circling major categories. Shopping, restaurants, utility bills, etc. – see if any categories stand out. I know there’s software that does this for you, but remember: The whole point is that you’re literally engaging physically with the spending behavior.
Write your total take-home pay at the bottom of the page, and start riffing out some division.
If you spent $450 on restaurants and your total take-home pay for the month was $2,800, does it feel right to you that 16% of your income went to dining out? That’s a personal call – but if your total rent only accounts for 25% of your income, that food spending might be put into perspective – spending almost as much on apps & ‘serts as you do on the roof over your head might indicate some shit’s outta whack.
Figuring out your next step
If you’re unconvinced or feel like you didn’t have any sort of revelatory moment in dissecting your spending for a month, repeat the process again. Resist the urge to explain away “one-time,” “random” purchases. There will always be random purchases – I literally added a $100 “Miscellaneous” line item in my budget because I was so damn tired of constantly playing financial jujitsu with the “one-off” purchases I’d make every month.
Two months of spending data might paint a clearer picture, and from there, you can get real about your trouble spots.
When I was trying to get my spending under control, one of the best things I did was limit exposure to temptation. I stopped going to the mall to “window shop.” I quit accepting invitations for happy hours and started inviting friends over instead. I literally limited the amount of time I spent in places where I felt tempted to spend money, and tried to introduce alternatives wherever possible.
While I hate embodying the personal finance meme by referencing iced coffee, I used to spend $3.44 every day on a cold brew, making my coffee budget around $103 per month before tip. Finally, I caved and bought a $100 Nespresso (one-time cost) and bought sleeves of pods priced at $1/each, effectively making my coffee cost every month $30. This was an easy area to trim, and notice that I didn’t switch to a regular coffeemaker and $12 bags of coffee grinds. I’m still a coffee snob who overpays for artisan crack milk – now I’m just a coffee snob who makes her coffee at home.