Hi,

One of the most critical things you need to do to start saving money is to identify what you’re presently spending it on, and how much you are spending. You may think you have a good idea of where your money is going, but small everyday expenditures really add up each month, and may not be so apparent.
One of the most effective ways of doing this is to record every purchase you make. This includes everything, from the daily cup of coffee to the electric bill each month. I still use the old fashioned paper and pencil but for sure a lot of people will prefer to use their latest electronic gadget like their blackberry for this. Use whatever is easiest for you.
Start by just writing down the date, and then listing all of the things you spend money on that day, such as the mid-morning cup of coffee, or the cat food you had to buy on the way home from work. Do this every day for a whole month. I create categories, such as “groceries”, “cat and dog”, or “car” expenses. I created a separate category for “food out” which would include things such as a sandwich at the cafeteria or snacks I might buy during the day. For me, that is enough detail, but some people might want to break it down even further.
Then at the end of the month add up all of the items in each category. I recommend doing this for at least three months or even six months to get a good picture of where your money is going. Some people track expenses their whole life. One reason the longer time period is more accurate is that some expenses don’t occur every month. You might have a car repair bill of $1500 or more but say this only happened one time during a year. Once you averaged everything out, the car repair bill was actually $120 per month.
Once you’ve added up all the items in each category, you can really begin to see what you’re spending your money on. I must confess that one of the things I was wasting my money on was cafeteria food at work. I found that buying lunch at the cafeteria was costing me $6 a day for 20 days each month. That’s $120 per month! This is more than the car repair that had seemed so expensive. I quickly learned to cut this down tremendously by taking my own lunch to work. So if you do the math, you can imagine how much money can be saved over the course of a year by being aware of seemingly little expenses like this.
Of course, some expenses can’t be avoided, like vitamins or pet food. We do get these at Costco however, and can still save some money.
After doing this expense tracking for awhile, you might even find that you want to increase your expenditures in certain categories. You might find more satisfaction out of buying some new toys for the kitty. This will seem like a small expenditure, after cutting out a large expense such as a $3 latte every day.
I hope this money saving tip is helpful to you. I know it has helped me a lot with finding out where my money is going.

Until next time,

Hal Merrill