Think you may be bad with money? You're not alone. A lot of people feel this way at one point or another. And considering that many of us haven't had much guidance on how to be good with money, it's understandable. Your next question would be how to track your spending? Let's answer these questions.
Why am I so bad with Money?
The first step is to stop beating yourself up. Life can be shit sometime and good sometimes. So, one should not think that you are bad with money. Here it's not about depriving yourself of not spending money & enjoy your fruits but it's more about creating a good habit of being more mindful about your money.
How to Track Your Spending?
Start tacking your spending into 2 parts. Essential and Non-Essential. You can use a spreadsheet or a diary to track your spending depending on your comfort. You no need to track your spending on daily basis, you can do it once a week. To do this Kakeibo, The Japanese Method of Saving Money will be helpful.
Kakeibo, The Japanese Method of Saving Money
Kakeibo (Kah-keh-boh) translates as ‘household financial ledger' and was a method invested in 1904 by a Japanese woman called Hani Motoko, notable for being Japan's first female journalist. kakeibo is a simple, no-frills approach to managing your finances.
As many people would agree, changing bad financial habits isn't easy to do — partly because our spending habits are deeply cemented into our daily routine, and the act of spending also includes an emotional aspect that is difficult to detach from.
The first step is to divide your spending into 3 parts:
- Essential Spending
- Culture and Entertainment
- Non-Essentials.
1. Essential Spending
Your Essential Spending would include:
- Housing Cost - Rent or EMI
- Utilities - gas, electricity, telephone, internet, insurance, etc.
- Transport - patrol, tax, bus/train tickets, car maintenance & repairs, etc.
- Loan or debt repayment
- Groceries
- Childcare cost
- Pet cost (if you have a pet)
- Medical cost
Most of these costs are unavoidable. But one can try to reduce this cost. Like, changing your provisional store to get a discount, reducing your electricity usage when not needed, finding an alternative low cast internet service provider, shopping smartly and mindfully, stopping purchasing unhealthy food products, etc.
2. Culture and Entertainment
Breakdown your spending's into cultural expenses, holidays, and entertainment, like:
- Books, Newspapers, Magazines
- Entertainment Subscriptions - TV, Netflix, OTT, Music streaming, etc.
- Tickets - Theater, cinema, sports, comedy, art shows, gigs, etc.
- Gym membership, exercise classes.
- Holiday or weekends - accommodation, travelling, spending money, etc.
- Birthday parties, weddings, etc
- Hair cut and beauty appointments.
Ask yourself the following questions:
- Were they worthwhile?
- Did they provide an opportunity for you to have fun with your partner/friends/family?
- Can you afford them? or did you overspend?
- Are there any ways you could have cut costs?
Answering these questions would help you evaluate whether you have made the right choice and will help you ensure that you live within your means.
3. Non-Essentials
It will include things you probably buy on impulse and might not necessarily need, such as clothes, shoes, accessories, homeware, flowers, plants, make-up, a meal out, etc.
Here, I don't want you to think that I am calling out the joy of living. But, instead, spending on these things should be mindful.
Before purchasing we can ask ourselves:
- Do I need this? Will it be useful and does it make me feel excited?
- Is there an obvious home for it where I live?
- Being truly honest with myself, how do I feel about buying it? Happy, excited, indifferent?
- What is my emotional state in general today? Am I stressed, celebrator, feeling bad, calm?
This will help you to identify your emotional triggers for your spending. But, once you have made your purchase, now ask yourself:
- Was I killing time?
- Did I buy the item because I read about it or received a marketing email about it?
- Was I intending to spend money on this item before I went to the shops or opened the link in my browser?
Now, think about how you feel about spending:
- Do I feel happy with my purchase?
- Do I regret it?
- Was I in a frenzy when I bought it?
- Will I find the purchase useful?
- Am I focusing on quantity over quality?
- And am I spending in the most ethical, sustainable and environmentally friendly way?
For most of you while answering this you will be justified and essential about your spending. But below are some ideas to modify our behaviour to ensure we spend more mindfully:
- Leave the item for 24 hours - I am sure you will have a change of mind
- Check your bank balance regularly - Daily every morning check your bank balance. Yes, it is scary habit to try but does wonder.
- Spend in Cash - don't carry your card with you.
- Put reminders in your wallet - like ‘DO YOU NEED THIS? REALLY?'
- Change the environments that cause you to spend
- keep reminders of payment deadlines.
Conclusion
Nobody is perfect and you probably won't remember to do this every time, but even being slightly more mindful of the way that you are spending your money will make a huge difference.
I make a monthly budget, divide it into essential and non-essential and track my expenses. This has really helped me to spend mindfully. Also, I am attaching a sample pdf and excel sheet divided into essential and non-essential which I use to track my spending.
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