Spending Money – Where is it Going?

The first step in living the frugal lifestyle is to find out where you are spending your money. What do you do with the money that you earn? If you don’t know what you are spending your money on, then there is no way to reign in your spending, or figure out where you can be saving.

Track your Money

You should start tracking every dollar that you spend right now. Whether you are writing a check, using a credit card, or handing over cash, you need to know who that money is going to and what it was used for.

Once you have been tracking your expenses for at least a month, you will start to get a picture of where your money is going. You can add up your expenses every week, or every month. As month seems to be a good time period because most bills are monthly.

Make sure that you don’t forget those expenses that are not monthly. Some expenses, like car registration, are not monthly and you need to make sure that you take these expenses into account.

How to Track your Money

Tracking your spending

There are different ways that you can track your spending. You can write it down in a notebook, create a spreadsheet, or use a financial program like Quicken.

Whichever system you use, make sure that it is convenient, so that you will keep up with it. I make sure that I get a receipt for everything that I buy. Then I go home and enter the information from the receipt into Quicken. That way I can look in Quicken to see what I’ve spent and what is left in my budget.

When you first start out tracking your spending don’t go overboard with details. Don’t overwhelm yourself. If I am spending cash, I only track the dollar bills that I spend. If I spend $5.50 on something, I will enter that I spent $6, because I actually gave them $6. Even though I got 50 cents back, I don’t track that. I only track when I break a bill. It is just too much work to try to track every penny that is spent.

Spending Categories

Also, I categorize my spending so that I have a better idea of where it is going. When you first start out, I wouldn’t use too many categories. Things will just get complicated. So here are the categories that I start out with:

  • Household – Rent, mortgage payment, utilities, and other things spent on your house or apartment.
  • Groceries – Food.
  • Giving – Giving to non profits, or tithing to your church.
  • Entertainment – Recreation, eating out, movies.
  • Education – Expenses if you are in school or you have kids in school.
  • Auto – Money spent on cars for car payments, gas, repairs, registration and insurance.
  • Medical – Insurance premiums, doctor, dentist visits, glasses, prescriptions.
  • Clothing – You have to wear something.
  • Bank charges – Charges from banks, like interest, finance charges, overdraft fees, late fees.
  • Miscellaneous – Things that don’t fit into another category. Just make sure that you are not putting too much into the miscellaneous category. If you are, then maybe you need to add a new category to your tracking.

Of course, you can tailor these to meet your needs. If you don’t have a car and do fine with public transportation then you won’t need the auto category. Just don’t use too many categories when you start.

Why am I doing this?

So what is the point of all of this? It seems like a lot of work?

As you track your spending more and more, you will start to see what you are spend the most on each month. Did you realize that you were spending that much going out to eat? Or, did you know how much your car is really costing you?

Once you know where your money is going, you have the information to decide where you will be able to save the most money. I would start looking at the large expenses. Since this is where you are spending the most money, this is also where you can probably save the most money.

Once you know where you money is going, you can create a spending plan. See the next steps in How to Be Frugal.

Where Does My Money Go?
Where Does My Money Go?

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