Money Management 101: Why You Should Track Your Spending

Do you ever wonder why you run out of money by the end of the month? Do you earn plenty but still live paycheck to paycheck? Do you ever look at your savings and think you could be doing better?

If you answered ‘yes’ to any of these questions, you’re not alone. In fact, a recent poll from SunTrust Bank showed that many Americans – even those with high incomes – are in the same boat.

Strangely enough, hard times aren’t necessarily the culprit for many families who are just squeaking by. According to the survey, which focused on families who pulled in more than $75,000 per year, 44% of those living paycheck to paycheck blamed their money woes on lifestyle purchases such as dining and entertainment. Even worse, when looking at the under-30 crowd, that percentage jumps to 71%.

Of those polled, a full third claimed that a lack of financial discipline held them back from achieving their goals. And among those who blamed their money problems on lifestyle purchases, a full 68% cited dining out as the root cause of their programs. Now that is hard to swallow.

Why Everyone Should Track Their Spending

While those statistics might be shocking, they’re hardly anything new. We’ve all heard how the median American savings rate hovers right around $0.

The fact that middle-class Americans are literally eating through their incomes shouldn’t come as much of a surprise. High earners have to blow their extra dough somewhere, right?

But no matter how much (or how little) you make, the root cause of living paycheck to paycheck is always the same. When you make X amount of dollars each month, and spend it all on stuff you can’t even remember buying, all you’re left with is confusion and regret. High earners just have much less of an excuse than the rest of us.

It’s certainly a cycle, and one that many Americans can’t seem to pull themselves out of. But for those who want to make a change, there really is a way out. It’s called “tracking your spending,” and it’s the only way to face your financial demons once and for all. Here’s how it works.

How to Track Your Spending

Tracking your spending is the only way to find out how much you’re spending on non-essentials – things like entertainment, dining, sporting events, hobbies, and excess personal care. While $20 here and $50 there might not seem like a lot at the time, those small expenditures can add up to a world of hurt over the weeks and months.

To see where your money has been going, get out the last few month’s bank statements, credit card statements, cash withdrawal statements, and/or receipts. Create categories that align with your most obvious spending categories.

Then go through your statements line by line and tally them up in each category. Your categories will likely include things like groceries, dining out, entertainment, alcohol, sporting events, and so on.

Once you have your total spending tallied up from previous months, you might be shocked by what you discovered. But don’t stop there. Continue tracking your spending in real time by keeping receipts and writing down all of your purchases. You can try using only your debit or credit card for discretionary spending, and then easily track your purchases through the bank’s website.

Start at the beginning of each month and keep a running total of your spending on every category you have some control over. As the month progresses, “check in” to see where you’re at. You might be surprised to see how much you’re spending on any given day or week – and at just how quickly those numbers add up.

What to Do After You Track Your Spending

Once you’ve discovered the truth about where your money is really going, there is no turning back. You can continue with your self-destructive spending habits, but you’ll never be the same — obliviously unaware of their consequences. Because once you’ve seen the numbers in black and white, you can no longer hide. 

Here’s where the rubber meets the road. If you want to change your spending habits once and for all, use the information you’ve gathered to create a new budget that aligns with your savings goals.

If you want to save as much as possible at first, start with a bare bones budget. Or, if you want to learn to live off of last month’s income, try a zero-sum budget, where every dollar is accounted for. Heck, you can even create your own budget with a spreadsheet or a plain ol’ pen and paper. It doesn’t really matter how you do it, just that you do it — and stick to it.

Just remember, tracking your spending is just one piece of the puzzle. What you do next is what matters most. The world we live in isn’t going to change; you have to change.

And if you want to keep more of the money you earn, the time to start tracking your spending is now. But brace yourself — you might not like what you see.

Holly Johnson

Contributing Writer

Holly Johnson is a frugality expert and award-winning writer who is obsessed with personal finance and getting the most out of life. A lifelong resident of Indiana, she enjoys gardening, reading, and traveling the world with her husband and two children. In addition to The Simple Dollar, Holly writes for well-known publications such as U.S. News & World Report Travel, PolicyGenius, Travel Pulse, and Frugal Travel Guy. Holly also owns Club Thrifty.