Money Management

The Path To Financial Freedom: Start Counting

the year

Be sure to check out the first part of this series Get Your Mind In The Game

In order to become financially free you need to know where you are right now. You need to know how much money you are spending each month and on what you are spending it. If more is going out than coming in then you need to do a 180 to become financially healthy.

You can’t possibly know how much money you have going out unless you count it. It’s like those contests that ask you how many M&M’s are in the jar. Sure you can estimate it but you’re probably going to be off by 20-30% if not more. That’s a lot that you don’t know about. And how can you find out where you can cut back if you don’t know where it’s going? Then the answer is obviously that you have to count it. It’s not as bad as you think and it will have a major impact on how you view spending once you become aware of it.

These are a couple of ways to keep track of your spending:

Carry A Pad

Writing down in a small paper pad after you purchase is a not so great way of keeping up with your purchases because I’m sure you’ll be in a hurry after some of those purchases and forget to write them down. However if you can remember to write it down after each purchase you will have a very accurate picture of your spending.

Update From Online Balance

When you use a debit card your purchases usually show up the same day. At a point in time(end of the day/week/month) sit down and view your purchases from your online account and write them down and place them in a category.

This is the way I do it because most of my purchases are with my card. If I do pay with cash I can see where I took the money out at an ATM and can assign it because I took that money out for a purpose.

Automatic Tracking (Almost)

You can use an online program like Mint.com or a desktop program like Quicken to automatically keep track of your expenses. This is a great way to do it if you don’t have any time available to do it the other ways. The down side is that it doesn’t always categorize things the way you want to so you’ll have to take the time to categorize some of your expenses. But overall it does do a great job of keeping track.

As you can see there are several different ways to keep track of your money. If you don’t like any of these ways then make something up or mix and match. As long as you work towards seeing where your money goes it doesn’t matter how you do it.

Personal finance isn’t a one size fits all thing. Every one is different so find out what works for you. In this case find out what works best for you to keep track of your spending.

I just want to emphasize that actually being aware of how much you spend each month will change your life. Just think about what it would be like find out the world was always round when you thought it was flat. Imagine what knowing that information would allow you to do. It would make you expand your horizons and do things you never thought you could do.

Being aware of your money will allow you to control it so you can do things you’ve always wanted like a long awaited vacation.

If you don’t do anything else at least do this step of tracking your spending because it will make a world of difference.

What was it like when you first started to become aware of your spending?

Check out part 3 of this series Boundries

 

Comments (10)

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  • The Path To Financial Freedom: Start Counting…

    In order to become financially free you need to know where you are right now. You need to know how much money you are spending each month and on what you are spending it. If more is going out than coming in then you need to do a 180 to become financial…

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  • Like you say above, I have always used a slip of paper in my wallet for month tracking of bill I now have taught my ex to do the same to see the disposable income left over every week. Can be upsetting to see how little money is left but careful budget keep a roof over your head and the water in the taps hot!
    Louis

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  • Great post, I actually tried to go the mint.com route for a whille but like you said everybody has to find their own way of keeping track of their expenses. I ended up created a spreadsheet where I could map out all the expenses and income every month. It isn’t anything crazy just a simple check and balance system. I think you can even find some real basic ideas in the templates section of microsoft.com

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  • […] 28, 2010 · 5 comments Tweet Share So far you have Your Mind In The Game and you are Counting your spending.Now it’s time to do something with your spending info. You should have them all […]

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  • […] = 336; google_ad_height = 280; Alright so your mind is in the game, you have all your expenses counted, and you set up boundries.Now it’s time to do something with that extra money that you are […]

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  • Personally I find that these days there’s no need for carrying pads around anymore, what with the prevalence of smartphones and all. There are many apps that can help us track expenses, and even link up with our bank account as you mentioned. The most important thing is to be mindful of our spending, and what follows is better financial decisions.

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  • I always count my money every now and then. I keep on calculating everything and allot just this much in certain things. I love saving money since I was a kid, although I tend to use them when I saw something that captures my attention. You just need to be aware of what you are trying to spend. Great post!. XD

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  • Totally agree. Knowing where your money is going is the first step to financial freedom. I had no idea for years and stayed in debt far longer than I needed to be. Mint.com is a great wake-up call!

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  • I have exactly the same technique, I open a ‘note’ on my smartphone but you could also do it with a saved text message if you don’t have a smartphone. Once a week I update an excel spreadsheet to track how I’m doing on a monthly basis. I honestly found this revolutionary. This is the way I budget now since I have found that since I started keeping record my outgoings are naturally below my income. I think it’s because you become more aware of your spending.

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