But when I paid attention to the purchases I was tempted to make, I soon realized half the things I buy are mindless, impulsive items. Sure, I budget and pay myself first, but that doesn’t mean I’m spending my money in the best way possible. I could be saving more for retirement. I could be saving more for travel. When you’re more conscious with your spending, you might be surprised at how much more room you can create in your budget. It almost makes budgeting unnecessary because you spend less by design, and no longer need guidelines.
How to track your own spending
Shannon McLay, founder of the Financial Gym, a financial planning firm in Manhattan, said she asks new clients to follow the same experiment I did: Track every expense they make, every day, for a month.
“I’ve had clients save over $3,000 a month just from paying attention to where they’re spending their money,” Ms. McLay said. “They can use apps like Expenses Ok or Expense Keep or Excel or just the notes feature on their phone.”
I used an old-fashioned pen and paper and a notebook when I tracked my spending. It was a little less convenient than an app, but it seemed to make me more connected to the exercise. I didn’t just write down my purchases — I also wrote down the items I was tempted to buy, and the emotions and justifications I attached to them. This might seem a little touchy-feely, but so much of personal finance is touchy-feely. It helps to understand how you feel when you’re tempted to spend, so that you can watch out for those feelings later.
“After the month is up, figure out what you spent on a daily, weekly and monthly basis and determine if that felt high, low or just right,” Ms. McLay suggested.
From there, challenge yourself to spend less in the following month. It’s not an exercise you have to keep up with forever, but tracking is a good way to reset your spending habits and make sure you’re aware of how you spend.
And that’s really the goal of the exercise: awareness. It’s to simply spend your hard-earned money with a little more thought. It isn’t to say you’ll never give into another impulsive purchase again. For that, Ms. McLay suggested giving yourself a small cushion for surprises.