{"id":2167,"date":"2013-09-30T18:20:27","date_gmt":"2013-09-30T22:20:27","guid":{"rendered":"https:\/\/blog.bradpine.com\/?p=2167"},"modified":"2019-06-12T11:22:39","modified_gmt":"2019-06-12T15:22:39","slug":"4-key-steps-in-taking-control-of-your-spending","status":"publish","type":"post","link":"https:\/\/blog.bradpine.com\/2013\/09\/30\/4-key-steps-in-taking-control-of-your-spending\/","title":{"rendered":"4 Key Steps in Taking Control of Your Spending"},"content":{"rendered":"

\"Debt\"<\/a>Budgeting is like exercising for many people: We know we should do it, and we really want to, but after a long day it\u2019s pretty much the last thing on our minds.<\/p>\n

What if it could be easy? If you could tackle it without all the stress? In this article, you\u2019ll learn about the four key steps in taking control of your spending and your finances without all the agony.<\/p>\n

The Way Your Mind Works: Mental Accounts<\/strong><\/span><\/h2>\n

Take a second and estimate your annual income. Got it? Now quickly estimate your annual expenditures.<\/p>\n

It\u2019s a lot harder, isn\u2019t it? Most people can easily tell you their earnings but can\u2019t even come close to estimating their total spending. Now try something else: How much did you spend on gas last month? This might not have been as quick as figuring out your earnings, but it wasn\u2019t that difficult, right?<\/p>\n

It\u2019s easier to estimate a category of expenditures because we have a natural tendency to divide our spending into what behavioral economists call \u201cmental accounts\u201d. In other words, we naturally split purchases into categories, such as the mortgage and the groceries, and the result is that it\u2019s much easier to estimate what we spent on each one.<\/p>\n

When it comes to tracking your spending, take advantage of your natural tendency to categorize. Think about your major expense categories for a few moments. The list probably includes things like housing, household bills, insurance, groceries, eating out, etc. How much do you spend in each one?<\/p>\n

The best advice I can give you is to take a look at this Bradford Pine Wealth Group Expense Analysis Worksheet<\/a>, which I am confident will help you in the process of tracking and understanding your spending. It allows you to put in your monthly expenditures in the appropriate categories and automatically calculates your annual totals, which gives you a detailed picture of where your money is going.<\/p>\n

Gathering Data<\/span><\/h2>\n

Now, some of the categories you put together might be difficult to estimate, and the amounts in others might include a bit of wishful thinking. So I also recommend that you take the time to track your actual expenses.<\/p>\n

There are as many ways to track spending as there are people. Some prefer to regularly look back through their check registry and credit card statements, others collect receipts, and some may prefer to keep a running list of their expenses on a Smartphone or piece of paper. You can also use online tools like Mint<\/a> or software like Quicken<\/a>, which link to your bank accounts and automatically track your expenditures for you. Many of my clients find our Expense Analysis Worksheet<\/a> to be very helpful. Once you\u2019ve filled it out once, it\u2019s easy to update it regularly and keep track of your spending habits over time.<\/p>\n

Whatever your strategy, I encourage you to try this out for a month, then compare the results to your estimates. While you\u2019re at it, take a look at your debt and savings habits. What are you spending money on? Are you setting money aside? Do you carry a balance on your credit cards? Your future self will thank you for asking these questions and getting your spending under control.<\/p>\n

Making a Plan<\/span><\/h2>\n

Once you have all the data together, it\u2019s time to make a plan. Start with the big picture. What are your goals? What do you love to do? These might sound unrelated to budgeting, but, in the end, money is supposed to help you do the things that you want, so it\u2019s an important place to start. For example, if you\u2019re looking to start a business, you might want to think about saving more while you can to ensure a smoother ride during your start-up phase. If you\u2019re carrying credit card debt, consider how it might be holding you back from tackling that home renovation or going on that dream vacation.<\/p>\n

It\u2019s also important to communicate with your spouse. Are you both fully aware of your financial situation? Is your spouse oblivious to your debts? Having a heart to heart about what\u2019s going on and what you dream about is a critical starting point to making a new spending plan.<\/p>\n

From here, you can get down to the basics. What categories are out of whack? Are you spending more than you\u2019re earning? Should you be contributing more to your 401(k) or IRA? Have you started a 529 plan for your newborn?<\/p>\n

While it seems daunting at first, you might be surprised that there are places you can cut that are not all that painful. And by re-organizing your finances so that you can meet your big goals, whatever they may be, you might find yourself much happier overall!<\/p>\n

Adjusting for the Long Run<\/span><\/h2>\n

Once you\u2019ve made some decisions, it might be time to readjust to a new spending pattern. I find that putting bills and savings on automatic pilot is an amazingly useful tool when you make these kinds of changes. Not only does automation free up your mental energy for managing your discretionary spending, but it can help make it easier to achieve your goals and better manage your finances.<\/p>\n

Of course, it can be difficult to adjust to a new system, so throughout it all try to remember that the benefits of reaching your end goal, whether it\u2019s having more fun, carrying less debt, or ensuring a more secure future, are immeasurable. Taking control of your spending will not only put you at ease in the short term, but it can set you up for more fulfillment and happiness in the long run.\u00a0 And isn\u2019t that what life is all about?<\/p>\n

Please let me know if you find my Expense Analysis Worksheet<\/a> to be helpful or if you have feedback about any enhancements you\u2019d like to see on it!
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\nphoto credit: Josh Kenzer<\/a> via photopin<\/a> cc<\/a>
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\nTo learn about retirement savings, download my free eBook, \u201c10 Tips You Need to Know About Your IRA Rollover<\/a>.\u201d This short book is packed with critical information that will help you make the right decisions about your retirement savings.<\/p>\n

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Budgeting is like exercising for many people: We know we should do it, and we really want to, but after a long day it\u2019s pretty much the last thing on our minds. What if it could be easy? If you could tackle it without all the stress? In this article, you\u2019ll learn about the four […]<\/p>\n","protected":false},"author":7,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_publicize_message":"","jetpack_is_tweetstorm":false,"jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false}}},"categories":[74],"tags":[1043,1075,1074,351,78],"jetpack_publicize_connections":[],"aioseo_notices":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p2p1nA-yX","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":737,"url":"https:\/\/blog.bradpine.com\/2011\/05\/04\/making-sense-of-your-spending-is-a-key-part-to-financial-peace\/","url_meta":{"origin":2167,"position":0},"title":"Making Sense of Your Spending is a Key Part to Financial Peace","author":"Bradford Pine","date":"May 4, 2011","format":false,"excerpt":"Think of how much you earn, whether it be from a salary, IRA distributions, or another source. Have a number? Great. Now, think of how much you spend.\u00a0 It\u2019s a lot harder, isn\u2019t it? Most people can easily tell you their earnings but draw a blank on their total expenditures.\u00a0\u2026","rel":"","context":"In "Knowing Your Spending Habits"","block_context":{"text":"Knowing Your Spending Habits","link":"https:\/\/blog.bradpine.com\/category\/knowing-your-spending-habits\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/blog.bradpine.com\/wp-content\/uploads\/2011\/05\/Sale-bags1.jpg?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]},{"id":846,"url":"https:\/\/blog.bradpine.com\/2011\/06\/01\/powerful-steps-for-any-investor-from-ira-rollovers-to-financial-planning\/","url_meta":{"origin":2167,"position":1},"title":"Powerful Steps for Any Investor: From IRA Rollovers to Financial Planning","author":"Bradford Pine","date":"June 1, 2011","format":false,"excerpt":"Congratulations! 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