Money Monday: The First Step to Financial Freedom
by Dr. Charles Alonzo Peters
Have you ever started the week with $60 in your wallet and days later opened it up and wondered why only a couple bucks are staring back at you?
If so, you’re like most of us. We see the money come in but have no idea where it all goes. The truth is most of our money vanishes in small amounts – $3 here, $7 there. The $3.50 coffee and bagel every morning that adds up to well over $100 a month. Spending $17 on gas on Monday, $30 on Wednesday, and $27 on Saturday sucks up hundreds of dollars in a single month without us even realizing it.
It’s easy to notice the big gaping holes in our financial ship like the mortgage and car payment, but it’s the small expenses that often go unnoticed – eating out, movies, highway tolls, magazines, newspapers, gas, clothes, and the like.
Benjamin Franklin, one of the greatest financial minds ever once said, “Beware of the little expenses; a small leak will sink a great ship.”
It’s the small amounts spent several times a day, accumulated over time that bleed us dry. Many of these expenses represent unnecessary money drains that if patched would put us on the road to financial security.
The first step to financial independence is tracking your expenses.
Yes, I realize this may sound like common sense – track your expenses to find out where you’re wasting money. But as philosopher Voltaire once claimed, “common sense is not common.”
Less than one third of Americans actually track and budget their expenses. No wonder the average household credit card debt is nearly $15,800.
For years I resisted tracking my spending, and for years I’d scratch my head wondering why I always had more month than money. Tracking spending seemed too involved, too time consuming. The thought of recording each and every purchase was revolting.
But as I found out recording your expenses, even for a single month, can dramatically uncover money leaks. And once you get started it’s not as hard as you think. The biggest hurdle is getting started.
I made it easy on myself and simply obtained a receipt for each and every single purchase I made. For some expenses like vending machines I made my own little “scrap paper” receipt. At day’s end I placed all my receipts in the same envelop sitting in my living room. By the end of the month I had my spending conveniently collected in one place.
Once you have all your receipts collected, the next step is to add the bill stubs from the cable, lighting, heating, and other recurrent bills. Then you have a complete snapshot of your spending. Use a simple sheet of paper, a program like Quicken, or online website like Mint.com to identify areas where you’re literally throwing money out the window.
For me, McDonalds, Starbucks, the morning newspaper, and the vending machine around the corner were literally robbing me of a sound financial future. $5.25 for breakfast, $6.95 for lunch, $1 for a newspaper, a couple $1.50 Cokes from the vending machine, and $1 candybar on the way home from work amounted to well over $400 a month.
Add in cable channels I never watched, internet subscriptions I never used, and a landline phone I never touched and the savings became significant.
Not everyone likes the idea of collecting receipts. Several applications allow you to record your purchases right on your phone. Alternatively, services like tweetwhatyouspend.com allow you to tweet your expenses into an online journal. Some people use a credit card for every single purchase and later scrutinize their credit card statement at the end of the month.
It doesn’t matter how you record your spending, simply realize it’s the first and most crucial step to get out of financial bondage.
BMWK family, do you track your spending? How do you do it? Do you keep receipts, use a phone application? Have you been able to identify your money leaks?
Every Monday you can find great insight and tips on managing your greenbacks by Dr. Charles Alonzo Peters of MochaMoney.com here on BlackandMarriedWithKids.com.
BMWK Partners
