Do you know where your money is going?  3 things you can do to find out.

“What is money”?  Seems like a simple question that should be easy to answer, right? As defined by Webster’s money is “something (such as coins or bills) used as a way to pay for goods or services and to pay people for their work.”  Seems like a revision is in order.  There was a day when we (a generation ago) carried coins and bills and money was tangible.  You could touch it, smell it, and in some cases, taste it (spices, salt, and livestock were used as money at one time).  Today money is represented by electronic digits on a screen.  Money is intangible.  We get paid via direct deposit.  Our mortgages, rent, and other recurring payments are automatically through our banks.  We swipe our credit cards.  There’s PayPal, Google Wallet, iPhones, etc.  Amazon has 1 click checkout on their app.  It doesn’t get much easier than that to buy stuff.   Electronic money is convenient but that convenience can erode your financial future if you lose track of where your money is going.

But you can have a more confident financial future by tracking where you spend your money.

People often share with me that they want to start saving for retirement or increase their current savings level but “have no extra money to do so”.  But in many cases, there is extra money we just need to find out where it’s going.

Here are 3 things you can do to get a handle on where that extra money is going.

• Review your credit card statement monthly. Credit cards are tricky.  You are buying things but paying for them later.  It’s with your credit card you misspend most of your money.  You may find you are paying for subscriptions or services you no longer use.  You may notice charges that don’t even belong to you or that you eat out more than you thought.
• Review your bank statement monthly.  When you spend from your bank account you are using money you have already earned (unlike your credit card) so you need to make sure you have enough to cover your purchases.  Review your balances.  Know how much you get paid and when you get paid.  Take note of when automatic deductions are drafted to avoid overdrafts and unnecessary fees.
• Track your spending for 3 months.  You will notice you develop spending trends over time.  These trends are important to understand as some months you may spend more or less on certain expenses.  Categorize every expense so that you can compare months.  If most of your purchases are electronic, you can go back 3 months and review those purchases.  There are many tools that you can use to track your expenses including the “Track Your Money Worksheet” I developed for clients.

I can almost guarantee that these 3 exercises will lead you to gain more control of your money leaving you in a better position to reach your financial goals.  These 3 steps are simple yet not always easy to do… But your financial future is worth it.

So, do you know where your money is going?