Do you often look at your bank account just a few days after pay day, wondering where all your money went?
Starting a monthly financial review was one of the best decisions of my life, especially only being 18 at the time. It truly brings to the surface areas you may be spending too much without even realising. It enabled me to see where every dollar went, in comparison to the amount I was earning. I was able to cut hundreds off my grocery bill and cut out things I didn’t need that I didn’t even realise I was spending my money on!
All it takes is to sit down for an hour on a Sunday once a month, go through your bank statement and categorize each transaction into an excel spreadsheet or app on your phone. It’s all worth it in the end, trust me. You need to come to terms with your spending habits and be honest with yourself, as it’s the only way you can grow and make improvements to your lifestyle.
1. Why it’s important
I went to the post shop to send something I had sold online. Instead of getting charged for one $5.50 postage bag, the cashier accidentally charged me for 6! LUCKILY I check my bank statements and I noticed the $66 dollar charge, so I phoned them and easily got it refunded. The lady on the phone was extremely apologetic, and I said “don’t worry we all make mistakes, at least I checked!” She replied “yes, most people just see a charge and think – wow, I really spent that much”.
2. How to set it up
Personally, I use a plain old excel sheet and that works for me. Here is what the layout looks like:
So I add up the total for the month and add them into the $ row, then I calculate what % that is of the total amount of money I spent. For example. at the end you may find out you spent 30% of your total income on groceries.
You can also use apps such as Money Lover, Monefy, AndroMoney, or Spending Tracker if that makes it easier. Trust me, taking an hour once a month to manage your money will help you out a LOT in the long run.
3. What to do with the information
You can create a budget, or set goals for yourself such as – don’t spend more than 5% on coffee and takeaways this month. Work on improving the results each month until you are comfortable with where it’s all going.
4. What items were a waste of money?
Did you really need that new dress you brought last week? Or those takeaways because you were too lazy to cook that night? Look at what you can do to reduce your spending and put your money towards what really matters.
5. Small expenses can add up
In my post Money Saving Tips I Learnt The Hard Way, I mentioned packing your own food for road trips. I noticed if I’m going for a long drive, I will often stop in and get a cheap burger from McDonalds because its quick and easy, however that $3.50 can add up very easily.
6. Compare the months
Try to increase your debt payments every month and decrease your expenses such as groceries and petrol.
7. Decide what your priorities are
What is most important to you at this stage in your life? Focus on throwing as much money as you can towards that.
8. How can you increase your income?
Find out with my other related posts –
9. Create goals
Create goals such as only spend 60% of your pay each month, or put 20% into debt payments each month, or spend no more than 10% on dining out each month.
After doing this you will start to challenge yourself, giving you more money left over at the end of each month so you can spend it on what matters to you.
If you have any questions, I will be happy to answer in the comments below. Good Luck!