The Truth About Taking Control Of Your Money: Where Does It Go?
One of the first things we need to do to take control of our money is to understand where it goes every month. I'm talking about tracking your purchases. We are going to get crazy-detailed here. There is no getting around it: I'm going to ask you to write down EVERY. SINGLE. PURCHASE. But it’s not as bad as it sounds. Stay with me! we'll do this together, step by step. 1. The ultimate goal The ultimate goal with tracking your purchases is to give you 100% control of your money. In order to have that control, you need to know EXACTLY where it is going. Tracking is a bit like brushing your teeth, not the most fun thing in the world but after a while you don't even think about it. 2. The strategy If you want to go hard-core, you can choose to do this for the rest of your life. If you prefer something less intense, you can choose to do it for a full month, quarter or year. It is up to you. The biggest insights probably come from the first full month (if it is a typical month). 3. How is it done? For each purchase you'll track: 1. The date 2. What it is 3. The amount
You'll write down everything you spend money on: rent, insurance, groceries, restaurants, entertainment, transport, fees, etc. Directly after you make the purchase. Then, every night you enter them to your tracking list (see point 7). 4. The tools For the daily tracking you will need either a tiny paper notebook and a pen that you can bring everywhere, or if you have a smartphone you can download any personal finance app that allows you to track purchases (or ”expenses”). It can look like this:
You will also need a spreadsheet of some sort (e.g. google sheets) or a bigger paper notebook to add all your tracked purchases, a tracking list:
5. The mindset tricks As with any habit change your brain will start to give you a hard time about this new, uncomfortable tiny action. Record a purchase? "what difference does it make?" etc. Expect there to be resistance and keep doing it anyway. The big rewards will come if you keep doing it. Remember that knowing exactly where your money is going is like travelling through a portal to another dimension of money-badassity! Also, give yourself as much time as you need to make mistakes. It's completely normal to forget to record purchases here and there. (I sometimes still forget after years of tracking!) Add a few dollars extra or less here and there. You'll improve over time, it's all ok. I highly recommend to enter the recorded purchases every night to your tracking list, that way it goes quickly and doesn't feel like such a big chore. 6. The tracking list (see image above "Tracking lists") This is where you enter your purchases each night. The amounts you have written down in your notebook or in your app during the day. To create this document you need to: 1. add the year at the top, then 2. a column with your current month. 3. After that you list all your categories. Here you can find inspiration to create your own categories. Copy the ones that applies to you after "Expense". The first tracking list you create will most likely change a lot and that is completely normal. Every time you enter a purchase amount, and the category is not there, then you enter it. Little by little the category list is fully tailored to your money. 7. Sources To have a really good picture of where ALL of your money is going, you need to find all the sources. The most common ones are:
Cash payments - enter every night
Credit and debit cards - Find statement and enter at the end of the month OR decide to record them manually so there is less work in one session of entering the purchases
Paper or digital invoices - Write down when you pay them and then add them to the list at night
Subscriptions & Direct Debit - check banking statement and add them to your list at the end of the month
Any other payment form.
Gathering all the sources, creating your documents, starting to track and enter all takes a lot of willpower at the start. If you work through it and find a way that works for you to track your purchases every day, it is one of the fastest and most effective ways you can take control control of your money.
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