We are all about partnerships at Momentum. We know that we cannot do everything and that many of the people in our community have knowledge and expertise that we can learn from. It is in the spirit of learning from our community members that we present the following blog post from guest blogger Douglas Hoyes, Founder & Trustee of Hoyes, Michalos & Associates.
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Think back to last month’s spending habits. Do you remember how much you spent, where you spent it and why you spent it? It’s easy to get caught up in a daily routine (like the morning coffee run before work), or to be taken in by store merchandising tactics that make us think we need what they’re selling. The truth is, these are habits that we can change, but first we need to know what we need to change.
A great way to analyze your spending habits is to track them using a one-month journal. Tracking daily expenses can be difficult because we forget to write things down or lose the motivation to continue. I suggest that you find a way to make this journal work for you. Here are three approaches to altering the way that you fill out the journal based on your personal preferences:
- The Traditionalist—Get a dedicated notebook to track your purchases.
- Tech Savvy—Use your smartphone or tablet to make a list or download an app.
- Spreadsheet Guru—Track your spending on an Excel spreadsheet where you can easily run the numbers, colour code and print off your findings.
Don’t over-complicate it. The best way to be successful with your journal is to keep it simple and tailor it to your needs. That way, you won’t get discouraged or forget about it because you’re using a method that you probably already use for other things.
What to Track
So you’ve found an approach that works, but what do you actually need to be tracking?
Write down all of your purchases—even the small things—and any payments you make monthly (don’t forget the automatic ones like your car insurance or hydro bill), so that at the end of the month your findings are honest and accurate. You may find that that $2 cup of coffee every morning adds up to $40, which could go toward paying off your debt or added to your savings. We all know that certain expenses are a perk, but we make them anyway because our spending becomes routine and it’s easy. Make an effort to rewire your brain to allocate your money to what’s really important, rather than meaningless purchases that don’t benefit your bank account.
Assess Your Results and Make a Change
Once the 30 days are up, go back through your journal and calculate your spending. Do you have more going out each month than you have coming in? What trends do you notice about your daily or weekly routines? Are you guilty of indulging in fast food many times a week or do you use retail therapy when you start to feel stressed? It’s important to evaluate where your money is going and why you’re making those purchases so that you can change how you look at money and redirect your habits. If you have more money going out than you have coming in each month, you need to make a change!
Think about it this way: you work hard for your money and your time is valuable. Spending money without having a plan or knowing exactly where that money went at the end of a month is like throwing it away (and who would ever throw away money?). Once you know where your money is going, you can create a budget that cuts out the things you don’t need, so that your hard-earned money can go toward things that you do need (like paying off your debt). If you need some help with that, download this free budgeting eBook for more information about how to track your spending and how to create a successful budget.
About the Author
Doug Hoyes has extensive experience resolving financial issues for Canadian citizens. A Licensed Bankruptcy Trustee and co-founder of Hoyes, Michalos & Associates, he is also a Chartered Professional Accountant (CPA), Chartered Insolvency and Restructuring Professional and Business Valuator. He regularly comments on a variety of TV, radio and other media outlets on topics surrounding bankruptcy and writes a column for the Huffington Post. Hoyes has been a Licensed Trustee since 1995 and has testified before the Canadian Senate’s Banking, Trade and Commerce Committee in 2008.