Tracking your expenses
Tracking your expenses is one of the biggest contributing factors to financial freedom.
You see, many of us simply don’t realize how much money we actually spend until we record everything. It’s most likely you’ll be surprised just how much small purchases can add up.
Listing and tracking your expenses will enable you to clearly see which areas you are overspending on, identify poor spending habits early, and decide if cutbacks are needed. This will ultimately lead you spend less and save more.
But wait, that’s not all. Seeing progress in changing numbers creates a motivating feedback loop which in turn creates momentum. You have an immediate sign of every accomplishment and a visible record of your saving progress. This allows you to compare performance and as a result of it, gain insight into your overall trends.
In some ways, it’s like making it into a fun game, and once you get into it, the whole process becomes even more enjoyable…
Convinced? Great! Here’s what to do:
Step 1 – Track your expenses
Starting from today, avoid paying cash whenever you can. Cash leaves no record of how it was used. When you want to go back to see how you are spending your money, cash leaves no clues.
On the other hand, credit cards and other forms of electronic payment, provide you with a complete record of your transactions and the status of your account. This will not only help you track your purchases but also make the whole accounting process a lot more organized at the end of the tax year (You don’t want to be missing out on deductions you’re entitled to…).
If you, however, want to avoid using credit cards altogether because you’re building up debt, then opt for debit cards instead. They won’t incur interest rate and still provide a record of every purchase you’ve made.
Next, sign up for free online services like Mint.com (USA) or getpocketbook.com (Australia) that track your spending, so you know where you can cut back.
Banking apps are also a great way to track your expenses. However, they may not provide the option to aggregate financial data from multiple banking institutes like some of the third party tools I mentioned above do.
Alternatively, If none of these tools fit your needs or offer you the ability to sync accounts from your financial institute, simply download or copy-paste your monthly transactions from your institute’s website to Excel, categorize them, and make totals.
This one habit should not take more than half an hour a month – even if you manage a few different accounts – and it will provide you with invaluable information about your spending patterns.
Step 2 – Identify your spending habits
Overtime, you’ll notice patterns in your spending habits such as eating at restaurants too often or impulsively buying that new “gotta’ have it” gadget/shoes/fill-the-blank.
Nevertheless, just like any other habits, these unhealthy spending habits can be changed, and that change is going to start today.
Take a close look at your expenses, identify unhealthy spending habits, and calculate EXACTLY how much they cost you.
For example, you might discover that eating out is costing you $150 a week. Eating more at home or packing food to go, for instance, could drastically cut this cost.
Now, making adjustments to your spending habits is never as simple a task as we think – our old habits have built up over the years and are often firmly entrenched.
So the first rule of making adjustments: Don’t try to change everything at once. Instead, pick one unhealthy spending habit, get it under control, and move on to the next.
The second rule: Don’t cut anything out entirely. Going cold turkey is not always sustainable, especially when the spending habit has some emotional attachment.
So for now, I ask you to simply cut back a little at a time, one area at a time.
For example, you could set a goal to lower your eating-out spending to $75 a week or less. Then, once you achieve that goal, keep dropping the number until you can’t meet your goal no matter how hard you try – that’s when you’ll know you’ve cut back enough to fit your lifestyle.
Even then, it’s quite remarkable how much you can save through this process. Saving $75 a week, for example, means thousands of dollars a year to go toward your freedom business.
Remember, every dollar you spend is a dollar not put toward your financial freedom mission.
* To gain more inspiration and motivation for your personal growth journey, I recommend visiting my SMART goals page, which offers a wide range of goal ideas to help you establish new aspirations and achieve greater success in life. This list was crucial in the development of my own life goals list, consisting of 100 goals that I pursued for ten years.
Chief Editor
Tal Gur is an impact-driven creator at heart. After trading his daily grind for a life of his own design, he spent a decade pursuing 100 life goals around the globe. Tal's journey and recent book, The Art of Fully Living, inspired him to found Elevate Society.
