There’s a term that advanced accountants learn when looking for fraud or theft –
“Follow the Money”.
It’s a great term, and it helped immensely with my job as a Consultant for an accounting firm.
It’ also a great term that we can use when looking at our spending.
Do you know what you’re spending your money on?
Before I kept track of my finances, I would keep it simple – I would look at my cash balances at the end of the month, try to remember what they were the month before, and see if this month I had more money than last month.
It was a reasonable system that told me whether I was saving any money, which was all I cared about at the time.
Looking back, I wish I had done things very differently.
I can say with certainty that I wasted thousands of dollars over my life, if not tens of thousands. <Insert Subscription Ask>
On what? I’ll never know, because I never cared enough to track my spending.
When I got married, I started keeping track of our income and expenses.
Not just what our balances were at the end of each month, but where that money was going.
Were we spending too much on eating out?
Was I spending too much money on books? (Yes, yes I was)
If you don’t know where your money is going, you are going to have a much harder time saving more of it.
If you want to save more money, keep track of exactly where your money goes. By keeping track of exactly where your money goes, you can look for opportunities to spend less, or stop spending money on things you don’t really need.
By keeping track of where your money goes, you will start to see whether or not you are making the best decisions with your money.
Chances are, you’re not. I definitely wasn’t.
Keeping track of where your money is going is especially important if you’re trying to save up for anything – whether it’s a new computer, new car, vacation, or simply to save up an emergency fund.
If you’re trying to save up for something big, you want to cut your expenses as much as you can.