Nobody likes budgeting. Keeping track of every dollar you spend and living on a strict spending plan is zero fun. Let's be honest: sticking to a budget is about as realistic as keeping a New Year's resolution.
A budget, though, has one great thing going for it: it tells you exactly where your money is going. When every purchase is set out in black and white, you have to face the reality of how you spend your money. So how do you get the benefit of a budget without the pain? By doing a spending tracker.
When I started Clarity, I knew I didn't want to use the term "budget" so I came up with "spending tracker". It's exactly what it sounds like: reviewing and categorizing all of your transactions over the past year. This gives you a picture of how you've spent your money.
Not only does a spending tracker form the base of your financial plan, telling you how much of your income you have left to save, but it also helps you identify leaks in your spending. Here are three eye-opening insights you can glean from building a spending tracker.
1. “I forgot I have that app.” Automated purchases like streaming services, apps, or online memberships are hard to keep track of and sometimes we forget about them. Going through your credit card statement will remind you of these forgotten costs such as apps and website memberships you no longer use.
2. “Did I buy that?” When we are out and about, we can get caught up in the moment and spend without really thinking about it. A shirt we don’t need, a nice smelling candle (my personal weakness), a kitchen gadget. And then there’s the smaller stuff: lattes, croissants, bottled water, magazines, books…easy to buy, easy to forget! Reviewing your spending transaction by transaction will bring it all back and perhaps make you more aware of your habits.
3. “I deserve it”/”You only live once”/”It’s self-care”/”Finally we can do things again.” Every life has some of this kind of fun spending – as it should. For me this includes fresh flowers, outings with my kids, and house-made smoked salmon from my local fish shop. Sometimes, though, we err on the side of too much and it’s actually de-railing our finances. Spending fun money is more fun when you know you can afford it.
There are two more eye-opening insights - read about them in my most recent blog post.
If you're ready to track your spending, identify your money leaks, put together a savings plan, and learn to invest, get in touch. That's what gaining Clarity is all about!
