Tracking your spending is a powerful way to better your financial situation. Before you can reach your goal of increasing your savings, paying down debt or starting to invest, you need to be cognizant of your current financial habits — because what we focus our attention on has a tendency to improve.
For example, there are many parallels between how people approach food and how they manage their money. Those who track their food intake tend to lose weight. You can apply a similar philosophy and track dollars instead of calories. I’ve found in my own life that when I focus on every dollar, I spend less — and, more importantly, I spend more consciously — simply by paying close attention.
But it’s not just me. In the words of management consultant and author Peter Drucker, “What gets measured, gets managed.” And according to Psychology Today, “Self-monitoring is possibly the single most important mechanism in changing any thought or behavior.” Paying attention to any aspect of your life — spending included — opens your eyes, and sometimes awareness is all you need in order to change!
So, now that you’re watching your dollars, how can you keep yourself from spending them as rapidly? I suggest creating bite-sized, measurable goals, so tracking your spending becomes a sort of game. It’s fun and effective!
Moreover, when you know exactly what is coming in and going out, you’ll feel more in control of an area of life where it’s easy to feel out of control. It’s empowering, and can inspire a positive upward spiral of making better spending decisions because you feel like you “have it together.
Personally, I like to track my spending the old-school way: I put pen to paper. I feel the act of writing down what you’re spending is more impactful than using an app. There’s something about spending money and then taking a moment to write down how much you spent and on what that’s more effective than opening up Mint.com once a week and skimming your purchases. That said, if you’re looking for an app to use, I recommend EasySpend.
If you’re thinking about tracking your spending, but not sure if you’ll be able to, try this: Write down all of your purchases for 30 days. Then, compare your spending during that period to your spending over the next 30 days. Ready to bite off a bit more? Start keeping track in service of a bigger goal like paying down your debt or increasing savings a certain amount by a certain date.
Tracking your spending may seem like a nuisance at times. But the amount you’ll save — and peace of mind you’ll gain — will make it well worth it.
Kate Northrup is a member of the DailyWorth Connect program. Read more about the program here.