Today I want to talk about the one and only way to understand in which category you spend the most of your money and what your bad spending habits are. Since 2 years I know my expenses in detail, up to the penny. And it helped me to change the way I spend my money!
Reasons To Find Out
There are many reasons why you should know where your money goes every month.
The first one I want to mention is that if you know all your expenses, you can easily identify your annual spending to understand when you could reach financial freedom. In my “About” page you see my goals and that my current lifestyle covers around 36000 Euro per year. Knowing that number helps you to stay motivated. It helps you to know that reducing this number would save you a lot of time on the journey towards financial freedom.
The second reason to find out where you spend the most of your money is because there will be category you never thought it might be so high. When I started two years ago, I was shocked how much money I am spending on “Dining out, ordering food”. It was a wake up call. Only finding out about it, helped me to change the way I spend in general, but especially in that category. Of course I am still spending money in that category, but every month I have a limit I don’t want to cross. In my monthly financial reports I list the top categories where I spend the most of my money. See the Financial Report July 2020.
Create A Budget
The next benefit of knowing all your categories and also your bad spending habits is, that you can create a budget easily. As soon as you have an understanding of where your money goes every month, it is easy to know create limits for each category. Even if you think you don’t need a budget, it will help you to save money. Just imagine what you can do with little amount of saved money per month. With just 25 Euro saved, you can create a new share savings plan to invest that money in a dividend stock every month.
Keep In Mind
The One And Only Way
Honestly in my opinion there is only one way to understand where your money goes. For me, it all started 2 years ago when I’ve read the book “Your Money or Your Life” from Vicki Robin. This book changed the way I think about my money. After reading this book, I was so motivated to understand my bad spending habits and each of the categories, that I started on the same day.
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There is only one way!
You have to track every penny that goes out of your wallet every day!
It doesn’t matter how you are going to track it. If you feel comfortable to do it on a piece of paper, do it in that way. If you want to do it with your phone, do it in that way. Since 2 years I am tracking every penny that goes out of my pockets, every single day. It doesn’t bother me. Actually it is a little fun. Knowing your limits for each category and to have the the goal every month to achieve it. I like it!
Use An App
I am using the app “Money Manager” on my phone. It is available for Apple and Android phones. There is no need to create an account and it is very easy to use. (No, I am not an affiliate). This app is just very easy and you don’t want to complicate things.
The earlier you start, the sooner you have a better understanding of your money and the sooner you find your bad spending habits. Think about the money you can save, and the money you can invest more. Tracking every penny every day is one of the steps to achieve financial freedom!
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Mr. Financial Freedom
Latest posts by Mr. Financial Freedom (see all)
- The One and Only Way To Find Your Bad Spending Habits - August 31, 2020
- Financial Report July 2020 - August 9, 2020
- Financial Report June 2020 - July 6, 2020
- Financial Report May 2020 - June 1, 2020
- Guest @ The Joney Talks Podcast EP. 37 - May 29, 2020