Budgeting – How to learn about your spending habits

Budgeting – How to learn about your spending habits

"The unexamined life is not worth living."

Budgeting is at the beginning a kind financial introspection.

Picture by bencrowe

It means becoming aware of patterns and tendencies within your use (or abuse) of your money.

Sometimes it can be difficult to go there. Many of us have huge issues with how we spend money – it becomes wrapped up in our sense of self-worth, a means to display our character or a huge emotional release. That is why budgeting, or actually thinking about and measuring our spending habits can be hard.

I have a trick up my sleeve that can make this learning process a little less painful.

It requires a shoe box 🙂

The receipt box 

  • First get an old shoe box or a biscuit tin and leave it somewhere in your kitchen, preferably where you drop your keys and wallet or purse when you come home in the evening. Write "Receipts" on it, just so it does not get thrown out.
  • Now, this is the challenging part. Every time you buy something, from a new car to a coffee, ask for a receipt. Place this receipt in your wallet, or in your purse or your pocket. Just place the receipts where they will all be in one place at the end of the week.
  • If you buy stuff online or with your credit card, just write what you bought and the date on a piece of paper and put in it the receipt box.
  • At the end of every day, dump all of the receipts into the receipts box.
  • Do this everyday for a month.

The reckoning

Now, this is the interesting part. At the end of the month…

  • Make yourself a nice cup of tea and open the receipt box.
  • Divide your receipts into a pile for each day and fix together with paper clips.
  • Now, take a long hard look at the size of each pile of receipts. Which day is the biggest? This may be the day you spend the most money.
  • Take each pile of receipts and tot up the total. List all the totals for each day on a sheet of paper. Which day costs the most?
  • Take each receipt and classify them into two piles – Necessities / Non-Necessities (how you define this is relative, but food, shelter and transport are useful!) Imagine if you lost your income. Which Non-Necessities would no longer be purchased? This is where you can start looking for cut backs and savings. This is a cut down version of the Thrifty Grid exercise. Use the full Thrifty Grid to really make some savings.

This type of examination of what you actually spend your money on can be very enlightening.

There is another benefit to collecting all your receipts. When you need to return something, you always have the receipt to hand. That jumper that was too big? The wrong colour teapot? No problem. Dive into that shoe box…

Socrates would have had a shoe box 🙂

One Responseto “Budgeting – How to learn about your spending habits”

  1. JC says:

    Very useful.. Have to put in practice though!

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