Chapter 3: Cut Spending Waste

“Waste” is spending money on things you don’t really care about or need, simply because you are not paying attention to your shopping habits. You can increase your spending and savings power by identifying where waste lives in your budget and taking steps to eliminate it.

Track spending
Track your spending for at least one month. This is a very important and revealing exercise. Only after you know where your money has been going can you begin to redirect it to where you truly want it to go.

When tracking, accurate figures are important. To help your worksheet reflect where you are really spending your money, use at least a couple of the following techniques:

• Write it down – Carry a small notebook and record every purchase you make. Jot down the date, item, and cost. Total each day’s spending.
  
  
• Keep receipts – Keep all purchase receipts and tally them at the end of the day.
  
  
• Use debit cards – Refer to the statements your financial institution provides, since they show where and how much you spent with your debit card.
  
  
• Monitor ATM use – Become conscious of how frequently you visit the ATM, and how much you take out before you have to go again. Be sure to write down what you are spending the cash on as well.

Expense-tracking software
If you have a computer with tracking software, you can input the information you have gathered into it. These programs can be very useful. They have preset categories that you can individualize for your lifestyle, helping you to conduct precise and long-term tracking. But remember – these tools only work if you use them consistently.

Examine your findings
After you have tracked your spending for a minimum of four weeks, examine your findings. If you are like most people, you’ll be able to identify areas of spending waste fairly quickly. When you build your budget, you’ll be using the results of your tracking work to make sensible and reasonable changes.

When looking at the numbers, begin to sort out your “wants” from your “needs.” Expenses that you can’t live without – food, shelter, transportation, and utilities – should always take priority over such discretionary expenses as gifts, vacations, and entertainment.