editor's note: please print this page. You'll want to have it handy as you take small steps towards achieving your goal.
What we're trying to do.
Find out where we spend our cash over a one month period.
Why we're trying to do it.
Often cash expenses are impulse buys. Only a couple of dollars. But, they can quickly add up. And it's easy not to notice how much you've spent.
Plus, it's a good exercise in self-discipline, anyone can do it and it's the first step to understanding your finances.
How we plan on doing it.
Depending on your lifestyle you may hardly use any cash (in which case this will be a very easy goal to accomplish) or you may use a lot of cash (in which case it'll still be easy, but not ridiculously easy).
We're going to keep a 'cash spending record'. That record can be on a simple sheet of paper, the SpendTracker® device, mVelopes® tracking system, Quicken® Online, or using the BudgetMap® tracking system.
editor's note: You can investigate these systems by clicking on the links below:
- Notebook Paper tracking. (instructions and free pdf below)
- Spendtracker - A pocket-sized electronic device to help you keep track of your budget in real time. Exclusive Dollar Stretcher member discount: 20% OFF. (use coupon code: STRETCH20).
- mVelopes - An award-winning online envelope money management solution. Mvelopes takes an age-old principle and applies it for today's cashless world.
- Quicken Online - See all your bank accounts and credit card balances in one place on your computer and on your mobile device - for free.
- BudgetMap - Turn your checkbook into a highly effective budget planning tool.
We want to keep track of just a few things.
For each cash expense we'll want to know what the date was, the amount of the expense, where we spent the money (most often a store name or if you have teenagers a kids' name) and what we spent the money on.
If you're going to use the paper system you'll need to either create your own form or download the free pdf that we've created for you. Download Spending Tracking Sheet here. Just print out the file.
On the sheet we're going to have columns for the things we want to track: date spent - amount - store - item - category. You'll fill out everything but the category on a daily basis as you spend cash.
Each day we're going to keep the 'cash spending sheet' in our purse or pocket. We're going to list any cash expenses. Even if they're less than $1. If you should happen to leave it at home, make a note when you spend cash and add the entry on your cash spending sheet when you get home. Don't forget to include any place that you spend cash. Even if it's not really a store - like giving $5 to junior or the few dollars that you drop into the Salvatation Army Christmas bucket.
Don't worry too much about your entries. The main thing is that you know what they mean. Use whatever abbreviations make sense to you. The purpose is to help you know what's going on. It's not an IRS form (thank goodness!).
What will it take to successfully accomplish our goal?
- One of the following:
- a 'Cash Spending Sheet'
- a SpendTracker® tracking device
- a mVelopes® tracking system
- Quicken® Online software
- BudgetMap tracking system
-
Determination to list cash expenses every day for one month
- Ability to categorize expenses at the end of the month
Select Rewards for Achieving Goals
Most of us work better when we know that there's a reward at the end of our work. So we advise you to select a small reward to be enjoyed after you're part way to and when your complete your goal. It might just be allowing yourself to brag about your accomplishment to a close friend. If you miss a day it doesn't count towards your 10 or 20. That way you'll have some additional motivation to keep moving towards your goal each day.
Your Daily Goal
Days 1 through 10
(please fill in calendar dates here) _____________________________
- track your cash expenses as they happen on your selected tracking device (note paper, SpendTracker, mVelopes, Quicken Online, BudgetMap)
Day 10
(calendar date) _____________________________
- Reward yourself for achieving your goal for the first 10 days
Days 11 through 20
(calendar dates) _____________________________
- track your cash expenses as they happen on your selected tracking device
Day 20
(calendar date) _____________________________
- Reward yourself for achieving your goal for days 11 through 20
Days 21 through 30
(calendar dates) _____________________________
- track your cash expenses as they happen on your selected tracking device
Day 31
(calendar date) _____________________________
- Determine where the money is going. Just the daily listing will give you an idea of where your cash is going. But now we want to get a fuller picture. So after 30 days categorize the expenses. Use a few big categories (i.e. home, auto/transportation, food, entertainment, etc). You may need a special category. The purpose of this step is understand where the money is going. So use categories that will make that easy.
Day 32
(calendar date) _____________________________
- Determine a daily cash 'allowance'. If you're like most people, you don't want to be keeping track of every little cash expense forever. And, you probably shouldn't have to. The past month should give you a pretty good idea of how much cash you spend each day. Just divide the total spent by the total number of days. If you feel that your spending is just about right use that as your daily allowance. But, if you feel that you could save a little here and there, aim for a daily target slightly lower than the average.
Day 33
(calendar date) _____________________________
- Reward yourself for finding out where your cash is going and creating a plan to control it. Not something large, but enough to help draw you to achieving your goal.
Congratulations! You've achieved your goal!
Visual Aids
Some people find it helpful to have visual reminders around. Here are some ideas that might be helpful (but if you come up with something different, don't hesitate to use it):
- paperclip a note to your cash reminding you to list any spending
- Post-Its® in places where you'll see them daily
Other considerations
Someone may ask what you're doing. You may choose to tell them that you're taking control of your financial life. You might even want to challenge them to take control of their own financial life and send them a copy of this page.
Other questions
Q. Do I need to keep track of my expenses forever?
A. No, not really. Most people will be able to calculate how much cash they'll need per pay period. If it's within your income and not excessive, it's ok to just draw that much cash out for yourself and use it as you see fit until the next pay period. But, if you find that you're running short before your next pay, it might be time to start tracking again for another month. That would allow you to find out what's happening to your cash.
Q. What if I want to continue to track expenses?
A. Then go ahead and track them. It really doesn't take much time and does remind you that little expenses can add up.
Q. What if I can't afford to spend as much cash as I do?
A. Then your tracking will be very important. You'll be able to review it and see where your money is going. And, it should be fairly obvious which expenses will need to be eliminated.
Send us your feedback.
We want to know what worked and didn't work for you. Your comments are the basis for improvements to this and all of our lessons. Email your comments.
Tell others how to achieve this goal.
Ask them to be an accountability partner.
We're more likely to achieve any goal if we have someone who knows of that goal. Someone who has promised to ask us periodically how we're doing. Just knowing that the question is coming is enough to help motivate us on some days. Finding that person is a real plus.
Better still, find someone who wants to achieve the same goal. Work together and hold each other accountable.
Join FI if you're not already a member.
Financial Independence (FI) is a daily email designed to remind you of your daily goal and provide words of motivation and encouragement. We'll do everything that we can to help you achieve your goal. Plus you'll get timely reminders of other things that you can do to help you take control of your finances. And, it's free. All you need to do is to request it and then confirm that request via email.
Help us improve our tools.
Tell us how we can make it easier for you to achieve your goal. You're already using the tools. You're in the best position to find problems and potential improvements. Please take the time to share.
