Do you know where your money goes? EVERY DOLLAR? From my experience so far, tracking the dollars has been the single most important money changing habit and has made the biggest financial impact on our monthly spending. I'm not just talking about periodically glancing at your account on your mobile app. I'm talking about writing every single transaction down and categorizing it. While there are various apps (like Mint) that can handle this data for you, I've tried them and they never impacted my spending like actually writing it all down on paper.
Tracking every dollar is tedious at first. But, until you know where every dollar goes, it's incredibly difficult to control your spending. I've made it a habit to sit down every 2-3 days to write down and categorize every transaction. This allows me to control my spending throughout the month and makes me think about future purchases. I have often found myself reconsidering purchases that I wouldn't have hesitated to make before dollar tracking.
As you may already have gathered, I am a visual learner. Seeing this tracking and spending has completely transformed my spending habits.
Monthly Budget - Projected vs. Actual
Based on your usual monthly income and expenses, you can start each month with a projected income and expense spreadsheet. As your income rolls in and your expenses pour out, you plug those in. The result at the end of each month will be a nice snapshot of your surplus/deficit. It will also show you a total for each category, which has been especially helpful in seeing where our money goes. This also helps me see where I may need to tighten up the budget.
The Dollar Tracker
This is where you literally input every transaction - every dollar! Once you have listed your transactions for the month, you can group them into categories and transfer the category totals over to your Monthly Budget spreadsheet. These are your actual expenses that you can compare to your projected and see how close you got. Finally, all my years of watching The Price is Right are paying off!
Watching every single dollar has a funny way of putting your spending into perspective real quick. It's so easy to swipe a debit card and overspend on frivolous things. Trust me, those TJ Maxx and Target trips just don't hit the same when you have to write down every dollar. Let's just say that my "Target Dollar Section" category was a real moment of clarity, y'all. Talk about humbling!
With this zero-based budget technique, every dollar has a purpose. Any surplus is thrown at either paying down debt or filling (maybe even refilling) your baby emergency fund. What started out as a chore has become one of the most helpful parts of our debt payoff. Now you can see why The Dollar Tracker makes more cents.