How Much Are You Really Spending?

When I decided to get serious about personal finance in my early 20s, I knew it’d involve being completely honest with myself about my spending habits.

You see, I was never really bad with money. The few bills I had were always paid on time, I was smart about my credit card usage, and I was pretty good at saving when properly motivated.

My issue was the fact that my priorities were completely out of order.

I placed a greater emphasis on the things that benefitted me in the short term than the things that paid off much more in the long term.

Given the choice, trips to Chipotle, the mall, or the nail salon for my bi-weekly manicure always trumped contributing to my emergency fund or beginning to save for retirement. 

It’s easy to justify small expenses when it’s not apparent just how quickly they’re adding up.

I’m not here to tell you that a $5 iced chai here or a $100 pair of shoes there will be the single determining factor in whether or not you’ll be able to retire some day.

However, when left unchecked over time, those $5 lattes can add up to hundreds of dollars not spent on securing your financial future.

It wasn’t until I took the time to add up just how much money I was spending on frivolous things that my eyes were opened. It was a major turning point for me and it just might be the kick in the pants you need to start taking control of your money.

I’m challenging you to follow the steps below to find out how much you’re really spending.

Find Out How Much You’re Really Spending

Step 1: Estimate
Start by recording estimates of how much you think you currently spend each month in major categories. The categories could include:

• 💸 Bills
• 💰 Savings
• 🍎 Food – Groceries
• 🍔 Food – Dining Out
• ⛽️ Gas/Tolls
• ⛔️ Debts
• 👗 Clothing
• 🎉 Going Out/Activities/Hobbies

Step 2: Look Back and Add
Grab a calculator (and maybe a snack if you need it) because it’s time to do some math.

Gather your bank statements from the last three months and add up your expenses for each of the categories you decided on in the previous step.

To make things easier, take it one month at a time. Start with the first category and add from the 1st of the month all the way to the end. Record your total before moving on to the next category. Repeat this until you’ve determined the spending totals for each category for all three months.

Why three months though? Having at least three months’ worth of totals works best for determining spending averages in the next step.

Step 3: Determine Averages and Compare
Finally, find the averages for each category by adding the three totals and dividing by three. How do these averages compare to your estimates from the first step? If you’re anything like I was, you might be cringing right now 😬

Don’t fret my friend. This new knowledge of how your money is really being spent will enable you to make smarter money choices. The rest is up to you now. Good luck!

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