Sometimes we don’t realize that we have a spending habit – we fail to see those small everyday purchases. The Redbull at the gas station, the chapstick at the checkout line, the item from the One Spot in Target – all those little extras that start to add up and wreak havoc on our budgets.
So, how do we cure those spending habits? How do we develop strong spending habits instead of weak ones?
Write it Out
By now, you know that you need to and should have a written budget but let’s be real for a moment, many of us may write down our budgets but how many of us actually stick to them? Usually, we wreck our budgets as a result of those little purchases that slip through our fingers like sand. And although a written budget is the first step in identifying those small purchases, there is nothing like tracking your expenses to make you realize what it is you spend.
This will be hard, in fact, you’re probably going to hate it but that’s why this works. For the next month, hand write out every. single. purchase. Carry a small notebook, pen with you, and as soon as you get into your car or sit down at your desk at work, write out the purchases you just made. You need to do this within an hour of making the purchase and you need to avoid the temptation to just shove your receipt into the notebook – a receipt does you no good if you don’t actually use it to track your spending. That’s why I’m making you hand write out your expenses.
Be Specific
I encourage you to be specific when tracking. Example of what your spending log should look like is this:
April 26, 2015
QT – Total: $14.95 – RedBull – $4.75, Cigarettes – $5.95, 2 Packs of Gum – $4.25(can you tell I stole this example from one of my hubs’ gas trips? 😉 )
Chick-fil-a – Total: $9.97 – #1 with water, Kid’s nugget meal
April 27,2015
Target – Total: $23.67 – Dog food – $9.99, dog treats – $5.99, and new leash – $7.69
Get the idea? The more detailed the better because in the next step, you’re going to analyze just where you spend your money – where the leaks are in your spending and budget.
Money Minute
If you read my book Real Life on a Budget, you know that a money minute is crucial to keeping your finances in check and a money minute will serve you well during your month of curing your spending habits.
At the end of every day, you need to manually tally up what you spent for the day. Once you have your total, look at your budget and determine if you spent any money that was actually budgeted for. Were those extras at QT something that was in the budget or where they just impulse buys? Did you plan to stop at Chick-fil-a on the way home or were the kids driving you crazy so you caved? (Happens to me more than I’d like to admit!)
By forcing yourself to track what you have purchased every day, you will start to see where your spending habits and your budget don’t align.
To Budget or Not to Budget?
After your month long tracking fest, it’s time to determine if these expenses should be included in your budget. I know, you’re screaming right now, “But I don’t have the money to add this to my budget!” And that’s probably very true, in fact I’m willing to bet it’s the reason why your budget hasn’t been working – you haven’t been paying attention to your spending habits and they are causing you spend money you don’t have.
So now, you have to ask yourself if these expenses should be in your budget. If you’re consistently spending on those extras – buying a RedBull almost every day, or purchasing fast food every week (even if it is just one day a week), these are expenses that you need to be including in your budget. Of course, you can always try to go without these expenses but you need to be realistic and ask yourself if you can do without them.
What I mean is, can you really go every day without a RedBull or is it something that you will find yourself still buying after you’ve cut yourself off? If it’s something that you’ll still purchase regardless, it needs to be in the budget.
How Can You Save?
Using the RedBull example from above, if it’s something that you determine should be in the budget, it’s time to determine if you can save money. For example, would purchasing a pack of RedBulls at the grocery store during your weekly grocery shopping trip help keep you from purchasing one every morning at the corner store? If so, include this expense in your grocery budget.
Do this analysis for all the expenses that you determine should be in your budget. You may find that you can actually save your budget by recognizing that you value those little expenses and including them in your budget.
Throughout this exercise, you should not only be able to determine where the holes in your budget are, but also if what you already have budgeted should be in your budget. Do you really need to have $100 a month budgeted for clothes or can you make do with less? These are all critical questions to ask yourself to keep your budget and yourself in check with your spending.
How do you cure a rouge spending habit?
Those are some good suggestions! Most of our bad spending habits came from impulsive shopping. We’ve been able to essentially completely stop impulsive shopping by
1) Always shopping with a list. It doesnt come out of the store if it wasnt on the list. If it was important we will go home, write it on a list, and go back 🙂
2) Envelope system really helps us as well – makes us see opportunity cost. We only have $__ to spend on ___, so we better spend it wisely (AKA doing things we actually enjoy)
Shopping List = LIFE SAVER for me! My husband thinks I’m crazy because I will clothes shop with a shopping list, but it keeps me from buying 7 pairs of pajamas for my boys when they only need one each. 🙂
Tracking expenditures has been a HUGE eye-opener for me! I started just about a year ago, and it. was. shocking. I fell off the wagon in June, but have been back at it this month. I can’t say it prevents me from making bad choices all the time, but it can be helpful for reigning in spending as the month progresses.
Just getting pen and paper and writing down every expense for the day can be an eye opener. It is easy to spend a couple of dollars without much though, and then do it again the same day. Writing down everything and having a look at it in the evening can really show this. A man might duck into convenience store for a snack in the morning and then again after work for another snack. That jumps at you off that piece of paper.
Sometimes people have asked me for budget advice because I am an accountant. That is always the first thing I advise so they will see exactly where the money goes and pinpoint the changes to work on. (There are no magic tricks).
Unfortunately, by a peculiar twist of psychology that I do not understand, the problem of dealing with these “awkward” expenditures may be resolved by ceasing to write down expenses. And nothing is actually done.
That piece of paper is screaming “waste of money, do something about it”. Perhaps it is easier to stop recording so there is no piece of paper to issue such commandments?