When it comes to our finances, they're very abstract. Check cards and electronic bill paying don't make it much easier; the concept of exactly how much money is spent is a difficult one to grasp. In the days of cash, it was much easier to understand where our money went. We started the weekend with a bulging wallet and ended with a slim billfold. We could actually see our money disappearing. However, it's impractical to pay this way today, yet it's hard to see the money disappear when there isn't any tangible money changing hands. Here rises the often asked question, "Where does all my money go?" To better answer this question, try to make your spending concrete by making a list.
It's work, but that makes spending all the more painful. Painless spending is what caused the habits that we're trying to break. Keep required bills painless: the mortgage, your car payments, the utilities. However, try to make the extra spending a bit of a chore.
A good way not only to inventory your spending but also to add a bit of tediousness to your shopping is to make a daily list of every dollar spent. Keep a notebook handy to record the spending, and make yourself enter the spending into a larger receipt book at night. A day without spending would be an anxious retreat from this chore as well as a healthy banking day.
List the morning coffee, the gas, the lunch, and every item purchased at the department store that day. Then, in the evening, transpose these totals to a larger receipt book. Keep one page for essential payments that fluctuate like groceries, gas, and doctor's visits. Then, keep another page for all the other spending, the non-essentials.
Every so often you'll need to evaluate the list. At first look at it daily. Then, look at the week in general. Eventually, you'll be analyzing once a month. At some point you may be able to get rid of the list altogether; it's a way to visualize spending and shouldn't be thought of as a permanent habit (unless you want it to be). Look for gross overspending in key areas. Without a list, many would never realize that a coffee a day eats up an entire paycheck over the course of the year.
Tally weekly spending and compare it to the weekly paycheck. Are you spending half of your paycheck a week on random items? Cut through the unessential list of spending with a machete and raise your spending. Eventually, tallying will become a habit, and you'll inventory your spending list in our head before each purchase. That's the goal of the list.
Periodically, evaluate the essential but flexible list. You're stuck with the doctor's visits, but would a FSA benefit your family? Could you cut back on the grocery costs each week?
Remember, while most people look for ways to make more money, the easier option is to find ways to spend less. Create a new financial motto: spend smarter, don't work harder.
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