Today I will address the second point in the article which you can read in full here.
2. Frugal people know where their money goes, down to the penny. If you get to the end of the month and wonder where your money went, you are not tracking it as well as you could. While it may seem like a hassle to keep track of where your money is going frugal people know that this information is vital to keeping money in your pocket and from being frittered away on things that aren’t important, in the grand scheme of things.
To keep track frugal people use the dreaded “B” word — Budget. A frugal person’s budget has two parts — it has a plan for how they’ll spend their money for the time period of the budget (see mindset #1 above), but it also has another part, to track what actually happened to the money. They want to know, were they able to follow their plan?
Question to ask yourself: How well am I following the plans I’ve made for my money?
We all know life happens, and sometimes we can’t follow our plans completely, but when you know what the plan is, and make mindful corrections and deviations when life throws you a curveball, you’ll be much better off.
For many years I kept a fairly close eye on our spending but did not track every cent. It was always a bit of a revelation at tax time to see what our net income was, deduct the total we had paid on the mortgage and shake our heads as to where the rest of the money had gone. It is a sobering thought.
However, over the past 18 months we have kept track of everything we have spent in a spreadsheet which we complete every couple of days. I am not sure that it has changed our spending greatly but we do know exactly where it has gone. It will be interesting to compare things like groceries year on year. Because I have it set up in categories we can easily identify costs that will disappear when we retire – transport is the big one as we spend several thousand dollars each year in train fares to get to work.
I would definitely recommend tracking your spending to really understand where the money goes.
Tomorrow we will delve into the little purchases that can sabotage your savings.