How do you track your spending? This is the first question I ask in workshops on individual money management and a question I often ask my friends out of curiosity. Usually the people who attend my workshops don't track their spending which is why they've come to one of my workshops. But what is more surprising is most of my friends don't either, and they are not out there seeking help with managing their finances. Not tracking your spending is not a problem within itself, but it does become a problem if you are over-drawing your bank account more than once every ten years. I give myself that little break because I am only human and so far I've only overdrawn my bank account twice in the last twenty years - and the first time was when I wasn't keeping track of my spending. It also becomes a problem if you are having to use your credit card for regular monthly expenses, or if you have credit card debt, or if you are having trouble paying off your long term debt like mortgage or student loans.
So here's your list - and if you have done any of these things in the last few years and you are not tracking your spending then you need to start now:
1. Overdrawn your bank account
2. Used credit card and not paid it off at the end of the month*
3. Can't pay off the minimum monthly amount on long-term debt (mortgage, student loans)
4. Are surprised at how low your bank account gets for "no apparent reason"
5. Have not been able to get cash from the ATM because your balance is too low
*We actually use our credit card for as many expenses as we can during the month because we get "travel points" for using it. But we also pay off the balance without fail at every statement. Our credit card company hates us.
There are a lot of ways you can track your spending and the easiest ways are on the computer. I used Quickbooks for our personal finances, but that can also be overkill for the average person because it was created for companies to use. Quicken is also a good program. There are plenty of websites out there too which help you keep track of your money. The most popular one I've heard about is Mint.com and although I've never used it I've heard good things about it.
If you are really struggling with money management and are overdrawing your bank account every month or you are using your credit cards every month to pay your bills, the first thing I would advise you to do is not pay any bills online for awhile. You need to get up close and personal with your spending and know exactly what money is going out. In a situation like this the best thing you can do is turn back to those old archaic checks and a check-book register and write down the amount of every bill you pay and all the cash you take out of the ATM, or point of sale purchases you make with a debit card. I would even go so far as to say don't use your debit card for the next few months. Use checks or cash and write down *everything* you spend and what you spend it on. It's not convenient, but then neither is over spending every month.
When a person files bankruptcy or has their house foreclosed, all that debt is not just swept away and no longer exists. Someone else has to clean up the mess. And usually it is the banks, who if most of you were keeping up on the news you already know they received millions of dollars in Federal money a little while ago. So, just throwing up your hands and letting your debt get out of control and saying, "OK fine! I'll just file bankruptcy" or "Just take the house back and foreclose!" may seem harmless on the surface, but what a person is essentially doing is saying "I made a huge mess. I can't clean it up, so I'm just going to walk away and let someone else clean it up." That is not good for the individual and it is not good for society.
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