People know when they are spending too much. They know when they are living on the edge each month – spending just up to or maybe a little past what they make each month. These same people (maybe it’s you, too) don’t live extravagantly, no Porsches or yachts. Just regular people, so where does the money go?
When clients come to me and they suspect they’re spending up to the bleeding edge of what they make each month and therefore have no extra money to save for their goals, I always do a cash flow, where I put all their spending for the last month into about 20 categories and VOILA! There are always one or two categories that seem ridiculously high.
I’ve already talked in previous posts about what those categories usually are. In this post, I just want to talk about why it’s important to isolate your “ridiculous” categories and monitor them specifically.
Let’s say you spend too much on “children’s activities” or “take-out and snacks.” Instead of feeling overwhelmed by having to keep your full budget every month and write down every stick of gum you buy and every tank of gas you fill, what if you just monitor your spending on your weak categories: children’s activities and take-out and snacks?
Instead of typing every transaction into an app or spreadsheet and worrying about leaving a light on accidentally and throwing off your electric bill, what if you said, “I’m fine on all my categories except x, and I’m not going to write down all my transactions and drive myself crazy. I’m just going monitor my ridiculous category.”
Budgeting doesn’t seem so daunting if all the other categories are fine and you just have to watch one or two. Maybe you can actually keep on your budget if you know you only have one or two weak spots that have to be trimmed back. We can all do that, right?
Try it for a month. See which category or categories you seem to spend a ridiculous amount of money in. I bet it’s not your electric bill, insurance or even gas, so why stress over your whole budget.
Find the difficult categories and watch them by either writing down each transaction in that category (or having an envelope with cash) and stopping your spending when you hit your specified amount .
There are many ways to curb your spending especially if you’re only worried about one or two categories. You’ll see that staying on your plan is a lot easier when you know where you have a weak spot and don’t have to watch everything.