Where Did My Money Go?

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by Advice Chaser
by Advice Chaser

We’ve all had it happen. You get your paycheck or a windfall of money and put it in the bank. But then, long before the end of the month, the money is all gone. Where did it go? You know you spent it, but it didn’t feel like you spent that much. If you had a budget, it’s possible you lost track of it. Or you want to understand why the budget you created isn’t working. It’s time to learn how to track your spending after the fact.

person holding empty wallet open

How to Track Your Spending

Tracking your spending is like budgeting, only you do it after the fact instead of before. This means that it’s much more realistic. Budgets are created with foresight, which is never 20/20. You may have been guided by wishful thinking or failed to account for unexpected bills.

Luckily, banks these days keep track of all your transactions, so it shouldn’t be too hard to find a record of your spending. Log into your banking app or website and have a look. Some payments may be more difficult to track because they are cash withdrawals or through another app. So your first step is to go through the list of transactions and make a note of what each expense actually was.

Next, categorize each expenditure by type. How you decide on the types is up to you. However, it’s important to distinguish discretionary purchases, which you did not have to make, from necessary purchases, which you didn’t have a choice about. Your rent, health insurance, and basic transportation expenses are necessary. But you could easily cut down the amount you spend on meals out, entertainment, and so on, so mark those as discretionary. You may like to have a third category for expenses that are partly discretionary, which you can reduce but not eliminate, like groceries. Recurring bills are necessary at the time, but it’s also worthwhile to remember that some are discretionary in the long run. You could cancel your streaming service or gym membership if you really needed to.

Use It to Build a Better Budget

Once you’ve gone through your expenses for a few months, you’re in a good position to start writing a budget. This takes what you spend now and makes small changes in how you spend it. Don’t try to start a whole fresh budget from scratch. Instead, be guided by your current spending and only change it the amount you think you actually can.

All necessary spending, as you tracked it, goes into the budget immediately. This includes recurring bills, average grocery spending, and whatever emergency costs you incur in an average month. You may find almost every month has at least one surprise cost, from having to call a taxi because of a missed train to emergency car repairs. Including an average amount for emergencies in your budget allows you to save that money every month until an emergency occurs.

Next, consider which of your discretionary purchases you are most attached to. Whether large or small, you made these purchases because you thought they would make your life better. Can you remember which purchases actually did? Consider whether you could get a similar value while spending less. For instance, maybe buying lunch didn’t make you happy, it only happened because you forgot to pack a lunch. That’s money that could be saved without depriving yourself if you plan ahead.

Ways to Stay on Track

Your actual spending will never be a perfect reflection of the budget you planned. Surprise expenses come up, and you may get tempted by a good deal. But your goal should be to harmonize your budget and your actual spending, making the most accurate budget you can and then adjusting your spending to stay within it. Here are a few tactics people use to stay on budget:

Cash Envelope System

Some people find they stay on budget much better when they only pay cash. This does make tracking your spending a little more difficult. However, by putting the cash for each category into a separate envelope, you can make it much harder to accidentally overspend.

Budgeting Apps

There are many different budgeting apps that will help you not only make a budget, but stick with it. In many of these apps, you can track your spending as it happens. You can set it to inform you when your budget in a certain category has run out.

Separate Bank Accounts

This works like the cash system but is a little easier. You set up several different accounts for your different budget categories. When your paycheck lands in your main account, you can immediately send some to your fun money account and some to your savings account. And when you go out to shop, you can leave the card for your rent and bills account at home. When your fun money is gone, it’s gone till the next paycheck.

Get Help If You Need It

Staying on budget is surprisingly difficult. If your tracking reveals that your spending is out of control, and you haven’t been able to rein it in with a good budget, you may need some extra help. A financial advisor can talk with you about your obstacles to healthier finances and help you create a plan for a more stable future. To meet the right professional for you, contact us today.

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