self-awareness and finances

For the month of May, I have tracked every transaction I have made in an Excel spreadsheet. Even something simple, like a cheap iced tea that was paid for in cash is tracked. It stinks.

I hate having to write down everything that I spend. I hate saying yes when I’m asked if I want to keep my receipt. I also really hate overspending in certain categories.

I have tracked my spending before, for a period of 6 months. It was painful then and I hated it, but I also appreciated how eye-opening it was to see exactly where my money was going. I had been doing okay before, but I really wanted to ramp up my savings and seeing how much money I spent and where it went showed me the areas I could easily cut back on to add to my savings (I’m looking at you, fast food!).  This method worked! I hated every minute of it, but it worked. Once I re-aligned my spending with my budget for a few months, I quit tracking so hard and eventually stopped. Bad idea!

Although I have done okay in the last few months, I know that I am not as careful with my spending as I need to be when I am not tracking it. I decided that May was going to be my month to “reset” and get back on track. I decided to do this in the middle of purchasing a house and moving. I know that my spending is going to be out of whack this month because of all the unusual expenses that went out the door (utility transfer fee, internet installation fee, miscellaneous house expenses) but I still wanted to know where I stood. I can’t lie, it’s a little scary to look at right now, with one more day in the month to go. I’m slightly hesitant to see my grand totals when I add them up tomorrow. I know that knowledge is power, and that I should use this information to affect my future decisions.

Here are a few reasons why I think forcing yourself to be aware of your spending is important:

  1. Self-awareness helps you understand your financial state of the union. Simply put, if you don’t know how much you are spending and where you are spending it, being able to have an accurate view of your true financial state is impossible.  Once you are aware of how much you are spending and in what categories versus to your income, you have a much clearer picture of your financial situation and have empowered yourself to make future money decisions.
  2. Selfawareness makes you become more accountable. Like I said before, the task of accounting for every dime that I spend stinks. I intensely dislike having to note my total and what I bought every time I spend money. It does make me realize where my spending weaknesses happen. It suddenly makes you think twice about an impulse purchase if you know that you are already close to or over your budget in a category. If you are forced to manually note a transaction, you start to realize your routine spending – which later will make it easy when you decide what areas you want to be more mindful of in your budget.
  3. Selfawareness forces you to be more realistic when you are financially planning. If you spend a month tracking your spending and are spending normally, you will typically have a good idea of the areas where your spending was non-negotiable (utilities, lodging, transportation, food) and where it was simply because you had a few extra dollars burning a hole in your pocket (the iced tea that I bought that I didn’t really need, but wanted badly!). Knowing this will make your budget estimations much more accurate. For instance, when I tracked my spending for a 6 month stretch, I realized that I spent too much money on fast food, but I wasn’t fully utilizing my grocery budget. That knowledge coupled with wanting to eat less processed food led me to lower my eating out budget and fully use my grocery budget. I was able to align my budget with my actual spending and make a healthier change. Win-win!

Tracking your spending is just one way to make yourself more self-aware of your finances. What other methods or hacks do you use to make yourself more mindful of your spending?

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2 thoughts on “self-awareness and finances

  1. healthfulsave says:

    I hear you! At our house we have the phrase “confess to Quicken” – we have used Quicken forever and I do run reports every week in some key areas, like Groceries. I like to keep it around 100./week for groceries or less. A Quicken report makes it easy to see how things are going.

    I don’t really foresee a time in the near future when we would stop tracking our expenditures – we would spend way too much without the daily “confessional”!

    • Becky says:

      I feel like I am always going to have to go back to tracking on occaision! I generally do pretty well for awhile after tracking, but inevitably I wander away from my goals…

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