How the little things add up

By glblguy


Ever look at your bank account and ask “Where in the world did my money go?”  I do that often. As a matter of fact, my wife and i were looking at our checking account balance the other night and asking that very same question. Fortunately for us, we budget and I track all of our expenses, so the answer was only a double click away by opening up You Need a Budget. Ours had gone to medical payments, as we still haven’t met our deductibles for the year yet. Unfortunately there were all unplanned expenses (son cut his hand, sick child, and a sports physical we didn’t plan on needing so soon) so we had to tap the emergency fund, but that’s what it’s there for.

Because we control our money, ours was more of a rhetorical question, as we knew the answer. It’s just shocking sometimes to see your account balance really high the day after payday, only to be practically empty a few days later once all of the bills are paid. For most though, the question of “Where in the world did my money go?” isn’t rhetorical, people truly have no idea.

In many cases the answer to this question is found in the small purchases people make constantly. It’s not the big purchases and expenses that “get’ya” it’s the little things.  People generally feel the big purchases are what causes them to ask this question, but it’s not. Big purchases are usually planned. While I know there are some that just get up head over the Best Buy to look around, and then come up 30 minutes later with a $2000 LCD TV, that’s not common…at least I hope not. To find the answer to where you’re money is going, instead of focusing on the big purchases, look at the little things.

Keep a detailed record of spending

If you don’t’ do this already, track all of your spending for 30 days. I’d suggest keeping a little slip of paper or small pad with you. When you spend money on ANYTHING, write it down. This includes small cash purchases such as gum, soda, cigarettes, lunch out…everything. When you get home, put the data into a simple spreadsheet and associate a category with that expense. If you aren’t spreadsheet knowledgeable, don’t worry paper and pen will do just fine, you’ll just have to do some manual adding.

Do this for 30 days, then run some totals on the categories. I guarantee you’ll be shocked by at least one category, if not a few. We often have small money “leaks” that in the scheme of things seem incredibly small, but over time (30 days), that small expenses can add up.

My personal education on this topic came courtesy of Starbucks. When I used to work in Downtown Charlotte, there was a Starbucks on the first floor of the building I worked in. I would walk by it daily, and soon got into the habit of getting a coffee each morning. Then all of the sudden, my team mates and I were heading down int he afternoon as well to take a coffee break. At some point some months later, I was asking that question “Where in the world did my money go?”  I added up my coffee expenses and it was in excess of $50.00/month! That coupled with a few other small things was crimping our monthly income by more than $150.00. Whoa.

Review with your spouse

If you have a bad habit of spending and want to control yourself but are having trouble, try using your spouse as a sounding board. I’m a spender…unfortunately my wife is as well, but much less so than I. I’m much better than I used to be, but still struggle with it and most likely always will. My wife and I have cap on our personal spending. If either of us wants to buy something that we haven’t budgeted for in excess of $30.00, we have to discuss it with each other. This isn’t an “approval” type thing, but more of a way of placing some checks and balances ourselves.

I cannot tell you the number of times I’ve come back to my wife with something I thought I needed, and how quickly she made me realize how silly the item was or how it would be a waste of money. Now, in fairness there have been many times as well she’s agreed and I either went back and bought it, found it online for less money, or we decided to save for it. That’s what I’m currently doing to purchase my Macbook Pro. Saving.

Make a budget to curb and cap frivolous spending

Nothing curbs frivolous spending than a budget. A budget is a plan and agreement on your spending. The budget caps are set by you and keep you from making the mistake of spending more than you earn. If you don’t have a budget in place, start one today. It doesn’t matter if you have more money than you know what to do with, you still need a budget. Even the richest corporations in the world run on budgets. Why? To control their money. A budget allows you to control what happens to your money, regardless of how much you have.

Not sure how to create an follow a budget, read my article on creating and following a budget. It’s easy.

Make changes to eliminate unnecessary spending

Now that you’ve tracked your spending, put a review process in place, and created a budget now it’s time to trim that unnecessary spending. Look for areas I like to call “leaks” and see where you can plug them. Buy coffee every morning at Starbucks? Make your own at home. Enjoy a few sodas during the day? Buy them at the store on sale and bring them to work instead. Eat lunch out everyday? Pack your lunch instead.

Spend some time looking at each expense, and consider if you could do something to get the same value but with less money. I guarantee you’ll find at least a few. Habits are hard to change, but if you stick with it the changes will soon become habits.

author: Larry

Photo by: Unhindered by Talent

8 Responses (including trackbacks) to “How the little things add up”

  1. DDFD at Says:

    Nice macro analysis– want to see it on a micro scale? Break a $20 bill . . . then tell me where it went. You will be able to remember the intial purchase, but accounting for the balance is usually a mystery . . .

  2. Emily @ Under$1000PerMonth Says:

    I use my debit card for everything but highway tolls and yard sales, which I have a small allowance for. This makes it so easy to see where money is going without having to write it all down.

  3. fern Says:

    good advice for a newbie, but i’ve been tracking my expenses for 20 years now and have long ago plugged up any small expense leaks (as well as some big ones)

  4. rachel Says:

    My husband and I thought we were doing “pretty good” about plugging those hidden leaks until he got laid off. Then we realized that there were a large number of places we could and should cut back on…and that it should have been happening all along. Now we keep track of every dollar and are quite amazed at how well we’re doing even though the income has dropped by about $400 a month!

  5. Craig Says:

    Keeping records is good but I don’t think you need to keep track of every penny. Just keep broader categories. I like how you suggest to keep an Other category because you have some impulse or unexpected purposes that come about so you should budget for those.

  6. Gina Says:

    Before, I was like DDFD … break a $20 and never know where the rest went after the initial purchase. I was living on cash only to help “cure” my dependence on a credit card.

    Now, I am like Emily … use the debit card for practically everything – much easier to track the “little” purchases that way, especially my husband’s (won’t collect receipts, won’t write it down). I know that sounds funny … went from cash then “back to plastic” in a way, but the debit card doesn’t have a delay and there is no credit line available.

    Hope you are doing well Gibble Guy! Nice to hear from you.

  7. Larry (Gibble) Says:

    Hi Gina! I’ll doing well thanks! Been focusing on my consulting work and working on starting a few blogging related blogs.