The purpose of this blog is to take you through the exact process that my husband and I have used to pay off more than $65,000 of debt in 11 months on a single middle class income.
To get you started on your journey, we began the process with making a promise and getting your spouse on board. Since then, you have calculated your net worth, reviewed the checklist to a strong financial plan, and written your goals.
Now you must develop a specific core habit to ensure your success.
If you don’t know where your money is going, you won’t know how to get it under control.
[bctt tweet=”If you don’t know where your money is going, you won’t know how to get it under control.”]
If you are serious about taking control of your money, paying off debt, and working toward true financial freedom, then you will need to commit to taking actions that may feel a little uncomfortable.
Creating and sticking to a budget is one of the best ways to ensure that you will meet your financial goals.
But before you can create a realistic budget, you have to know where your money is going.
Develop a system to track and categorize each transaction of money coming in to your financial accounts and money going out.
Pencil and paper work just fine, but I prefer using Mint or Personal Capital.
Both Mint and Personal Capital are free services that allow you to securely connect all of your financial accounts. You can add values for your tangible assets (e.g. house, car, etc.) so that you always have an idea of your current Net Worth. Both Mint and Personal Capital offer a free mobile app for your handheld devices so you can conveniently check your accounts from anywhere.
Here are four reasons why tracking your spending will lead you to financial freedom:
1. When you start tracking each transaction, you will train yourself to be more conscious of each purchase you make. This will allow you to assess whether an item is a “want” or a “need.”
2. We often underestimate how much we spend on things. Once you start categorizing each purchase, you might be amazed at how much money you actually spend on clothes or groceries or fancy lattes. When you are aware of your historical spending habits you can make intentional decisions to ensure that your future spending habits are aligned with your financial goals.
3.Eliminating your debt is a lot like losing weight. Sure, you can lose weight without logging the food you eat, but you will see results faster and be able to determine where you get off track much easier by doing so.
4. Eventually, you will get into the habit of checking your accounts and verifying each transaction that comes through. It will give you peace of mind to know what is happening day in and day out on your financial accounts, and you will begin to make smarter purchasing decisions, too!
Take some time to investigate how much you have actually been spending in each of the main categories in your life.
I have created a worksheet to help you with this step in my free guide, Jump Start Your Way Out of Debt. On pages 5 through 8 of the workbook, there is a table provided where you can enter your numbers and add any categories that may be missing.
Don’t skip this step!
You must track your spending to empower yourself to make changes so that you can reach your financial goals and live the life of your dreams!
Start tracking your spending today and check back next Tuesday when we create your debt payoff plan!
What About You?
Participate in the conversation. Do you track your spending? If so, how do you do it, and how has it affected your spending habits? Share in the comments below.
Disclosure of Material Connection: Some of the links in the post above are “affiliate links.” This means if you click on the link and purchase the item, I will receive an affiliate commission. Regardless, I only recommend products or services I use personally and believe will add value to my readers. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”
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I had to change my mindset before starting on this journey. The moment I decided that I could no longer live this life of being constantly chastised by my debt all the steps you mentioned (minus the husband part because I’m single) was a breeze. Now the view of becoming debt free is just over the horizon and its looks great.
I love that, Petrish! Changing your mindset is a huge part of it. Once you do that, it gets a whole lot easier to stick with your plan. 🙂
Before we started our debt payoff journey, we went back and tracked/categorized our previous year’s spending. I was shocked at how much more money we had spent in areas such as gas, groceries and entertainment than I thought we had. The difference equaled thousands of dollars a year. Tracking spending does indeed have the power to change one’s financial life!
That’s a great story, Laurie! Thank you for sharing!
My husband and I are currently going through yet another overhaul of our budget/financial planning. I love following your tips. They help keep me motivated. Thanks for sharing, cheers!
I’m so happy to hear that, Danielle! I’m glad they’re making an impact. 😉
We don’t, but we need to! We have an old Mint account, but I need to update it with all our most recent accounts. It’s on my to do list this week!
Great, Catherine! You’ll love having an easy way to see where you stand at any given moment once you get it updated.
We use Mint, and it is eye-opening (and a little shameful at times).
🙂 Knowing is half the battle!
Even if you aren’t eliminating debt, tracking spending I’d always a insightful step on where us your money going and letting you budget and plan!
Absolutely! No matter what your financial goals are, tracking your spending is an important habit to develop.