Here’s a typical story. You got paid and stuck a $20 bill in your pocket. Three days later someone asks, “How did you spend your $20?” You pause, think and reply, “I spent $4 on bread and milk, gave the kids $5, and I don’t know where the rest went!” Sound familiar? It’s a pretty typical response. I like to call it the “black hole of spending,” and the average person or family will spend $30 to $300 this way every month. So, how can you find out where you spend your money? Tracking your expenses is the only way.

To really track expenses, you’ll need to do this exercise for at least three weeks. The weeks should be pretty routine so that you get an accurate picture. Holidays or family events typically stretch the budget and tend to inflate the picture. There are many ways you can track expenses, but none of them are difficult. The hardest part is remembering to record the amount and item each time you spend money. These methods can help you get started:

 

 

• The Envelope Method: Keep an envelope in your purse or pocket. Every time you spend money, put the receipt in the envelope. Make a back-up plan for purchases that don’t provide receipts. Many people write the amount and item on the front of the envelope. Use a new envelope each week.

• The Note Card Method: A blank note card can be used to record all money spent and the items. Simply use a new card each week.

• The Tracker Method: The “Tracker” is a sheet that you can use to record expenses under categories. It’s available for download as a Microsoft Word document by clicking here. Again, complete a new sheet for each week.

Once you’ve chosen a method, you’re ready to begin. At the end of each week, place your spending amounts and items into categories such as kids, pets, eating out, gas, household, etc. Once you’ve completed three weeks of tracking, you’ll probably notice some trends. This will allow you to evaluate your spending. You may choose to make some cuts (which could free up some money for savings or other spending) or you may continue spending as you are. The important thing is to know how you spend your money and make the choices that work best for you or your family. See if you can eliminate your family’s black hole of spending!