Updated on 03.16.10

Where Does All of Our Money Go?

Trent Hamm

Kimberly writes in:

A few months ago (yep, one of those New Years Resolutions!) I pledged to get a better grip on my finances. I found some personal finance blogs to read and decided to start off by simply tracking where our money went.

But it’s impossible!! Every time I sit down with our bank and credit card statements, a big chunk of the money is going away to places I can’t figure out. There are vague entries on the bills and so on.

What can I do?

I’m going to assume Kimberly is single. If she’s not single, the first thing she needs to do is sit down with her partner along with a copy of all of their bills and the suggestions in this post and come up with a game plan they can approach together.

First of all, it’s absolutely the right move to sit down at the end of the month and review your spending. Simply knowing where your money goes can help you figure out some very simple things to do to improve your personal finance situation.

That being said, I think Kimberly’s problem could be a very common one. It’s due to the fact that the statement at the end of the month can only provide so much data.

Take ATM use, for example. If you stop by an ATM and withdraw some cash, you’re suddenly finding yourself with money that can be spent without any real paper trail. If you want to keep track of what you spent that money on at the end of the month, you have to keep the record. Your bank statement won’t be able to help you a bit. Counter withdrawals from a bank have the same problem, as does “extra” cash taken off of your debit card when you make a purchase with it.

To put it simply, whenever you spend cash, there is no paper trail unless you create that trail yourself. Your bank and credit card statements can’t keep track of your cash for you – and if you use cash quite often, you’ll find such statement use pretty much impossible.

You have two choices here.

On one hand, you can change your habits and stop using cash. If you rely on your bank card for most of your purchases, your statement becomes your paper trail for you. It will identify, at the very least, where all of your purchases took place, which, for me, is usually good enough.

On the other hand, you can start keeping a money diary. Just pick up a small notebook and keep it on hand. Whenever you spend money for any reason, jot down the date, the amount, and what it was in your pocket notebook. This might not catch everything (you might just forget about it sometimes), but if you have most of your spending in there as an entry, it can often create the picture you need if used hand-in-hand with your statements.

Which solution is better? It really depends on your comfort level. Try the one that seems the most appealing to you and see if it works. If it doesn’t, try the other one.

Another problem that might be causing this is poorly-worded entries on the bank statement and/or the credit card statement. If Kimberly can’t decipher what some of the entries mean, the data is useless.

If you find yourself with a lot of entries that should have meaning, but do not, you may want to seek assistance with reading your statement. If you still have trouble, you should consider seeking another financial institution. Such entries will always cause you trouble – and they certainly don’t need to be vague or unclear.

Good luck! You’re on the right path to taking control of your finances. Don’t let this little road bump deter you!

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  1. kat says:

    The best way I have found is to keep ALL of my receipts. Most stores give a very detailed list of purchases now. I got into the habit because of my HSA account, and then found it useful to track almost all of my purchases. Many store receipts even show what brand was purchased. I would suggest going through them at least weekly, as the ink tends to fade quickly. I make copies of all the ones with HSA eligible purchases. You can fit several on a standard page.

  2. Valerie says:

    I am going to assume Kimberly is married as she says “our” twice in her question. If there are vague entries in her bills I would suggest she get to the bottom of them pronto. A friend of mine had one of those vague entries. It turned out to be some discount membership thing she accidentally signed up for while shopping online. She definitley needs to do this in conjunction with her partner. Receipts are good. I also suggest checking your account once a week online while things are fresh in your mind of what money was just spent.

  3. brent says:

    I try to use my card for everything. And I mostly do. I keep all the receipts, crumbled, and whatever lying on my nightstand. Once I know its all accounted for in mint properly I feel free to ditch the receipt. I still have portions of my spending unaccounted for, but a bigger hole in my financial picture is when I go out with my girlfriend. Sometimes she buys, sometimes I do. I’m pretty sure it evens out, but it indicates eating out 1/2 as often twice as expensively and has a decent fudge factor.
    As for the badly worded statements, I remember the worst for me. DDA PUR PUB SCV NM POS DEBIT. Seriously… its the power company (PNM) on auto-withdrawal.

  4. Kat says:

    Like the other Kat, I keep all receipts and match the CC ones to the statement when it comes in – anything that cannot be matched gets tracked down. I have one of those manila pocket folders and everything gets stuffed in there. Handy too, because if something proves to be defective or needs returning for some reason, I know where to find the receipt. Also, I once found a fraudulent charge because of this method!

  5. Meagan says:

    I went primarily card only years ago. My bank catagorizes purchases for me, which is very handy. It works for me because I don’t carry a balance and so never pay interest (prefer the credit to debit). I check my account online weekly at a minimum to make sure nothing has been charged that I don’t remember.

    I do occasionally take out cash to have on hand for places/times that require it, but I generally just consider that ‘gone’ so it is okay if I use it for a treat that I don’t want on the books. I don’t do it frequently so it don’t make up a large portion of my expenditures.

  6. Ellen says:

    If you don’t understand a line item on your cc statement or bank statement, call their customer service rep. They can reference the original & explain what it means. I’ve found them very helpful (they don’t want you disputing charges). If you can access your account online, sometimes you can click on the entry to get the added detail (depends on the bank or company).

  7. Cheryl says:

    One more option would be to use the bank’s tracking information but to review it weekly online instead of monthly. You’re more likely to remember how you spent money in the past 7 days than in the past 30. I do this and I love it because I couldn’t seem to get into the habit of tracking spending in a diary every day, and would have trouble remembering things at the end of a month.

  8. sjw says:

    Another way to deal with the vague entries is to Google them. For example, I had an entry in my Visa that I didn’t remember. Once I Googled the name, I realized it was a business lunch (which was even better, because I can expense it).

    Because it was a small spot I hadn’t been to before, I didn’t recognize the name.

  9. MAtt says:

    For the poorly worded entries on her statement, she could try using a service like Mint.com. Mint will automatically check entries against ones that it knows and categorize them as what kinds of transaction it thinks they might be (you can always change it if it’s wrong). Additionally if you do figure out what some obscure name means, you can set Mint to automatically rename it to something else more meaningful to you in the future.

    Lastly, and this is just from my personal experience, 9 times out of 10 the most obscure names are gas stations.

  10. Charlie Park says:

    In terms of those vague expenses on credit card statements, you might consider trying out Mint or Wesabe. Marc (from Wesabe) likes to call those cryptic messages “bank puke,” which I think is a great name for it. They convert those strange lines of text into meaningful information.

    You can also use Wesabe to manually enter in cash transactions, or you can try PearBudget, which my wife and I built, expressly for the purpose of tracking expenses and then using that info to help you build a budget. It’s like the “money diary” Trent mentioned, except it’s online.

  11. Charlie Park says:

    Oh. One more thing. If you see a mystery charge on your credit card statement, don’t dispute the charge through your credit card company unless you’ve called the company directly and figured out what it was for. Every time someone disputes the charge through the credit card company (it’s called a “chargeback”), it costs the business between $20 and $30 as a “service fee” to the credit card company.

    The phone number’s there on the statement, and you can easily call the company and find out what the mystery purchase was. It makes it a lot easier on everyone if you call the company directly.

  12. Des says:

    I am with both Kats in that keeping your receipts is a better method than relying on bank or credit card statements. When I see an entry for Walmart, I don’t know if it was for household goods or food or medicine or pet food a combination thereof. It is basically useless for seeing where my money actually went. I could keep a journal, but it is just easier to save the receipts for future reference. Now, if only I could scan the receipts into Mint…

  13. Adam says:

    I don’t think a single person would use the word “our” money and “our bank and credit card statements”. Why on earth would you assume she’s single?

  14. Kevin says:

    Add another vote for keeping reciepts.

    As for cash, we only take cash out once per month, on the 1st. $400 each. That becomes our spending cash for the rest of the month, and we don’t track it. Everything else goes through the debit card, and the receipts go into an envelope next to the computer. The next time I’m sitting at the computer with a few free minutes, I enter the receipts into our spreadsheet tracking our monthly budget.

    However, we don’t do this at the end of the month, as Trent suggests. We do it continually, *throughout* the month. It’s the only way to know how much money we have left in each category. It lets us know when we’ve almost spent all of our grocery budget (or whatever), so we know to dial back the spending for the remainder of the month.

  15. Maureen says:

    If she wants to just keep track of the expenses then keeping the receipts is fine. If she actually wants to reduce her spending I think keeping a diary is better. Forcing yourself to actually write down the expenses would tend to make you think twice about them too. It focuses your attention on the act of spending.

  16. Johanna says:

    I know I’m going to irritate some people by being negative here, but: My goodness, Trent, did you even read Kimberly’s question? Between the assumption that she’s single (which a couple people have already mentioned) and spending 80% of the article talking about cash purchases (when that’s not the problem she says she has), there’s a pretty big disconnect between the question and the answer. And the one paragraph at the end that does address her stated problem is less than helpful – and also pretty patronizing. Seek assistance with reading your statement? It almost sounds like you think she doesn’t know how to read.

    Fortunately, the other commenters have weighed in with some much better advice for how to deal with charges you don’t recognize. I just want to add, for emphasis: This is not the time to bury your head in the sand or throw up your hands and say “it’s impossible.” If there’s any possibility that the charges could be fraudulent, you need to figure that out right away.

  17. Nicole says:

    Johanna– you’re not irritating me.

    Also, someone got DH’s debit card information (most likely from an airport ATM in London) and made some charges that would have looked perfectly legitimate if they’d gotten our credit card rather than our rarely used debit card. They were reasonably small amounts for Amazon purchases we’d never made. (I do have to say that having fraudulent debit charges is a lot more of a hassle than fraudulent credit card charges– it’s been a week since we protested and they’re still going through paperwork while we don’t have access to that money in our account.)

  18. Kerry D says:

    We’ve been saving receipts for just over a year now, with much improved finances. My DH has taken on the task of entering them into an excel spreadsheet, by category. We both think twice now, since we know that receipt we are about to create has to have a category and will draw against a budget there… For example, we’ve decreased our food budget by about 30%.

    It’s worth the effort, whatever system you come up with. And dealing with it weekly is best.

  19. bethh says:

    Thank you Johanna. Your criticism was far more constructive than mine was going to be :)

    Hopefully Kimberly can get her husband/partner on board with this. She didn’t say if the charges seemed little (like meals) but if they are, perhaps each person could have a cash allowance for at least a month or two, to try to limit the charges showing up, making it easier to track what IS going onto the card. Good luck!

  20. Adam says:

    Forgot to add, I get my statements for bank and credit cards online, and enter them into my Excel Budget regularly (every other day or so, of not every day). Then I can remeber what I spent because it was so recently. Going back at the end of the month is just too hard!!

  21. Adrienne says:

    To add to Johanna’s comment – its seems like Trent is doing this more and more (not actually answering the question / not reading the question correctly). Perhaps it is because he’s now doing so many reader questions. I’d rather see a few questions answered thoughtfully than bunches that seem off the mark. (I would be so frustrated if I came to Trent for advice and his reply did not address my question…)

  22. Dizz says:

    My tip – Itemize your receipts. Yes it takes a bit of time but the info you will get will allow you to see what in the world you are buying!

  23. Kathy says:

    If Kimberly is using a debit card, she needs to be keeping a register, the same as she would do if she were writing out paper checks. I have one created in Excel for my household. She needs to be recording all ATM transactions, direct deposits, automatic payments, automatic transfers, debit card transactions, and actual paper checks she may write out.

    And yes, keep the receipts!!

  24. kat says:

    To #17-CANCEL THE CARD NOW!! The small purchases are probably a “tryout” and the card info will be used for other large purchases. I worked customer service for a online company that sold items under $20.00 and we had our site used as a test for stolen cards to see if they were still active.

  25. Shevy says:

    Clearly Kimberley’s not single, since she says “our money” and “our bank and credit card statements”, but it’s not clear whether her partner is part of the problem or not.

    If her partner’s charging things that she doesn’t know about on their joint account then she should definitely ask, but not all couples are on the same page about keeping track of things and sometimes you just have to decide how important it is to know about all of your other half’s stuff.

    But, in that case, I’d say it would be better if the stuff was getting charged on a separate account. Not that I think one partner should hide charges from the other (well, except maybe how much that birthday present cost!), just that it would be better to have each person’s stuff clearly separated so she doesn’t worry about charges on her account being bogus. I think both people should know what cards the other has and roughly what the balance is, even if they choose not to deal with their finances in the same way.

    If that’s not the issue and it’s just that she can’t interpret the weird abbreviations on her statements, then it’s not patronizing at all to suggest that she ask the people who *write* the abbreviations what they mean.

    If she’s spending money and forgetting it between the time she spends it and when she looks at her statements, checking her account regularly online is a great idea.

    As for the cash thing (which she really didn’t mention as being a problem), I use cash as little as possible because cash is a giant black hole. I use my debit card instead and have detailed records of what I spent, when and where. And yes, I did have to learn to interpret a few things!

  26. Nicole says:

    #24, yes, the card was canceled right away. A new one is in the mail. But, unlike with a credit card, the amount taken has not yet been credited back to our account and we’ve had to fill out quite a bit of paperwork.

  27. Johanna says:

    @Shevy: I think the reason I found the “seek assistance” comment patronizing is that it doesn’t specify from whom she should be seeking assistance. If it’s supposed to mean, “Call up someone at your bank and ask them to help you figure out what the abbreviations mean,” I have no problem with that. But that didn’t come across to me the first (and second, and third) time I read it – it sounded more like he was saying, “Seek out any old person who’s smarter than you and who can help you sound out the big words.”

  28. BonzoGal says:

    A spending diary saved my financial hide. When I was in my mid-20s, I lived paycheck to paycheck, had some debt, and bounced a check once in a while due to my poor money skills. I bought a small notepad, and forced myself to write down EVERY expenditure. Pack of gum? Write it down. Bus fare? Parking meter? Write it down. All money that came in or went out was written down with the name of the purchase, date, and amount.

    The first benefit was that I started thinking twice about my numerous “small” purchases. At the end of two months of near-obsessive tracking, I made an Excel spreadsheet and plugged in every piece of data. Now I absolutely KNEW where my money was going, how long I should wait to make certain purchases, and how I could shift some of those numbers around to benefit me. No more bounced checks, debts paid off, started saving.

    That seriously saved my hide. Living without the anxiety of financial ignorance made all that tracking SO worthwhile.

  29. SLCCOM says:

    #11 Charlie, if the company gets hit with enough expenses for their cryptic notation on the bank statement, perhaps they will be motivated to try using plain English instead. Win-win for everyone!

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