Why You Need Track Your Spending If You Want To Change Your Life

Laura @ IWMLB ProjectI need to save moneyLeave a Comment

why you need to track your spending if you want to change your life

“I want to do something different with my life but I can’t afford it”.

If you are stuck in a corporate job and want to get out, chances are you think you don’t have the money to leave.

This may be true right now, especially if you spend all of your money each month. But what if you went through all of your spendings and thought about what really matters to you.

Would you start to see where money was being wasted and could instead be used for your escape fund?

If you are thinking ‘there is no way I can reduce my expenses”, or “I don’t want to change my lifestyle’, then track your expenses anyway for one month, you might be surprised!

why you need to track your spending if you want to change your life

 

Money gives you options

Maybe you don’t want to go travelling, or start a business. Maybe you are so burnt out you just want some space to clear your head and have some time to figure out what you do want.

If you have a stash of cash saved up, you have the option to leave. Or take a sabbatical, or give in your notice and walk out the door.

Maybe having that emergency cash there makes you feel like you don’t have to be there and therefore it all seems less stressful somehow.

It’s a very different thing, feeling that you can’t leave vs knowing that you can.

I bet you think you know how much you spend.

But do you really? No, I mean really, really.

I don’t mean a vague, err I think I spend about £20 a month in Starbucks. Ummm probably £50 in restaurants ish uh yeah.

I mean, do you know EXACTLY what the flow of money out of your account looks like?

Unfortunately, we tend to lie to ourselves about how much we have spent, how many biscuits we ate or how many times we facebook stalked someone.

The only way to really know how much we’ve spent is it see it in black and white. Bank accounts, credit cards, store cards, PayPal – they do not lie.

Here are some other blog posts that could be useful!

Why I started tracking my expenses

Back in the Neolithic age when I was in my 20s, I really wanted to go travelling. Trouble was, I didn’t have any money.

I was £4k in debt on a credit card that I wasn’t paying off and I was spending all my money each month living a fun life in London.

Somewhere in my subconscious, I must have realised that I didn’t want to get into any more debt (well done, brain!). So, I decided I was going to pay off the credit card and save up the money to travel.

During the day I worked in a shop and at night in a pub to try and get as much cash together as possible.

I moved back home (which I realise I was very lucky to be able to do) and drastically cut back on the partying and shopping that I had been doing previously.

I kept a calendar diary where I wrote down everything (and I mean everything) that I spent each week.

£10 on groceries, yup that went in. £2.50 on an alcoholic drink, yup that went in. £1.00 on a bottle of shampoo, yup that went in. (I’m trying to remember what the prices were 15 years ago!).

I tried to keep my expenses to an absolute minimum so that all my spare money could be put towards travelling.

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In the end, I went away for a full year, with the princely sum of £2,000. I worked along the way to fund most of my travels but I was so goddamn proud of that £2,000.

It was the best lesson I could have taught myself at a young age.

If there is something you really, really want to do with your life, more than anything, you need to find a way to get it.

And if that means making some tough choices with your spending, then so be it.

But you can’t make those choices if you don’t know what you are spending.

Why money could be leaking out of your account like a dripping tap

 One of the biggest eye-openers when tracking your expenses is the realisation that, if you weren’t checking each month, you could be losing significant money each month without realising it.

There can be any number of ways that money could be leaving your account willy nilly.

Companies introduce short-term deals in the hope that you won’t notice when the bonus period ends.

 Mortgages:

 I know this may seem blindingly obvious, but so much money can be wasted if you don’t re-mortgage and go onto the lenders SVR (standard variable rate).

I am not sure how this works in the States but in the UK, you can fix your mortgage rate for 2,3,5 or 10 years, at the end of that term, the rate reverts to the lender’s ‘standard rate’.

This can make a huge difference in the amount you pay.

If we take Barclays for example (big UK bank), one of their 2 year fixed rates for a first-time buyer is 1.33% fixed for 2 years. After that the rate goes up to 3.99% – this is a huge jump!

If we take an average UK house price of £220k (UK House Price Index for June 2017). And apply the 2 rates (based on a 10% deposit, repayment over 25 years with no fees) we can see what happens.

I used moneysavingexpert.com mortgage rate comparison which you can have a play around with here.

The difference each month is £286, over 2 years its £6,415 and over the 25-year term its £80,189!!!

Car/holiday/home other insurance 

Often, you will be sent a letter at the end of the initial term with your new ‘quote’, which is higher than what you have been paying for the last year.

I have found that if I shop around and then go back to my original provider, they will bring the price down and match it. If they don’t, then I leave.

Electricity and gas bills/Broadband

Again, if you have used www.moneysavingexpert.com or a cashback site (which you should) to get a great deal on your household bills, you need to make sure you make a note in your calendar for when it ends. First-year deals are always great, costs when the deal ends? Not so much.

You can also sign up to Money Saving Expert’s Cheap Energy Club which will send you alert when you could save a certain amount of money a year by switching.

Mobile contracts 

If you took out a contract that included the cost of the phone, the phone provider may not let you know when the handset is paid off, so you will continue overpaying for months and months. Once your contract period ends, you can save a huge amount of money by keeping your handset and switching to a SIM only deal.

Even if you miss one of these things, as you track your spending every month, you will notice if a payment suddenly increases and will be able to act on it.

You are still paying for something you don’t use:

 Topcashback did a survey on the most unused subscriptions and found that Britons are wasting £448 million PER MONTH. This is insane, people!

The list below is the top 7 most unused subscriptions in 2017.

  1. Gym Memberships (50%)
  2. TV streaming plans (21%)
  3. Credit reports (17%)
  4. Music streaming plans (15%)
  5. Magazine and newspaper subscriptions (14%)
  6. Hobby memberships (12%)
  7. Product delivery services (12%)

If you have any of these that you don’t or rarely use – CANCEL THEM.

Why your spending could be influenced without you realising

Companies want your money and will try everything to persuade you to part with it.

Companies are not your friends, they are trying to make money from you. I know you know this, but do you really know?

Pictures of half-naked beautiful people and ‘slebrities’ endorsing products are all done to make you part with your cash. It is a constant assault on your eyeballs, on the TV, on the side of buses, on the tube, in magazines. Why? Because it works.

If L’Oréal chucked their new mascara in the middle of a muddy puddle and took a photo of it, would you buy it? Nope.

So why is it any different when it’s being held by a pouting model? It’s still the same mascara.

Image mud puddle track your spending

L’Oreal’s latest ad location

Once you see through the advertising bullsh*t, you’ll only spend on the things you really need. Not things to make you younger, funnier, fitter, cooler, taller (insert more adjectives here).

How to track your spending

There are many ways you could track your spending, everyone is different so you need to find the method that works best for you.

I use a spreadsheet because I worked with them as part of my job and know my way around them. I built my own but there are plenty out there that you can use.

If you also want to use a spreadsheet, I found this one here that looks good. Scroll down to the Personal Budget Template and download that one.

If you are an excel whizz then build your own. Don’t worry about bells and whistle, my own has evolved many times over the years as I added bits in and took bits away.

If the thought of an excel spreadsheet makes you shudder and crawl under a table then there are plenty of apps out there.

The US seems to have more of these as UK banks are not so keen on sharing your banking information with a third-party app.

If you live in the UK, I found this article really useful from the Mini Millionaire.

The best one in the States seems to be Mint. Check it out and see what you think and whether it is right for you.

Also, nothing wrong with a pen and a bit of paper if you aren’t a fan of tech. Pinterest is a great place to find printables if you don’t want to make your own. I just typed in ‘expense tracker’ and loads came up.

I’ll be honest, it takes a bit of time, but once you are done with the help of a cup of tea and one (five) biscuits, you will truly know what your hard-earned cash is being spent on.

And then you can make an informed decision on whether to carry on spending that money or use it for something else.

Re-aligning your spending to only what you truly need and value

Unfortunately, money is not water, it’s doesn’t flow out and then rain back over your head like a money shower. Once it’s gone, it’s gone.

So, make sure it goes on something that you truly value and need.

Once you have all your figures there in front of you, you can go through each category and ask yourself two questions.

  • Am I happy with what I spent on this category last month, or would I rather have that cash for something else?
  • If I am happy with what I spent, how can I get it cheaper?

Cashback sites, comparison sites, supermarket loyalty schemes, eBay, charity shops borrowing from friends, there are always ways to get things cheaper.

Great questions to ask yourself when you are trying to save money

 It’s easy for me to say, track your spending = get your dream life. But it is tough sometimes, if you are having to learn to reduce your spending, the temptation will always rear its ugly head.

I found it useful to ask myself questions when I thought about spending money, and then make a decision based on the answer.

 If you want to travel:

How many meals in *insert country’ would that buy me? A £20 meal in London would get you 20 meals from a food cart in Thailand.

How much will it cost me to store this while I am away? Urgh, storage costs!!

Will this fit in my backpack? If it won’t, walk away.

Can I borrow someone else’s? it is very likely that you can! Unless it’s underwear. Don’t borrow underwear.

Would I rather go to that party/dinner or would I rather travel sooner? Hmm, instant vs delayed gratification.

If you want to quit your job:

Do I want to buy this dress/pair of shoes/random tech gadget or walk out the door sooner? No brainer.

Would I wear this if I wasn’t working in an office? My friend has 5 office outfits. She mixes and matches the clothes each week and no one notices. She is the MD.

If you want to invest for your future:

Would future me rather have this pair of shoes or the money? Or would I rather have the money with the compound interest?

Should you make a budget?

This is up to you really. I make a budget at the start of each year with a rough idea of what I should be spending each month but I don’t have a strict weekly or monthly budget.

Because I have been doing it for so long now, I instinctively know what I’m spending on groceries etc and I always make sure that I have got the best rate I can on mortgages, insurance, and bills.

If you are just starting out and are getting yourself out of debt or need a concrete number each week to keep you on track, then do set yourself a budget.

Once you get into the habit of tracking your expenses, it is unlikely you will ever stop. It just becomes too important not to waste money when there are so many more options available to you when you have a pot of cash.

So now you have the reasons why you need to track your spending and you have chosen the method on how to track them.

Now download your bank statement for last month and get tracking!

Do you track your spending currently? If so, how do you track it?

Want To Build An Escape Fund And Quit Your Job?

Sign up to the mailing list and get a 5 day email course on how to build your escape fund and quit your job!

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