Use Your Credit Card Bill As an Alarm to Estimate Your Spending
Here’s a little exercise. Remove the last credit card bill from your most used credit card. Print if it is an electronic invoice; otherwise, just grab a pen and place the bill on the table in front of you.
This post was originally published on The Simple Dollar .
Now go through each item and ask yourself a couple of simple questions about each one.
“Was this item a necessary purchase?” If so, put a little + next to that item on your bill. Simple enough – these costs should be obvious.
“Was this purchase optional but really satisfying when I look back at it?” Just leave it blank. Do not mark anything next to it.
“Was this purchase optional, but when I look back, it’s not all that good?” Put – next to this element.
“I don’t remember what the item was at all, but I’m pretty sure it wasn’t important.” Put – next to this element.
Now go through and sum all the signed items – next to them and see how much they get in total.
This is the amount of money you spent on things that are really easy to forget, that are unnecessary and that have not had any positive impact on your life.
This money could be used to pay off debts. It could be used to accumulate a down payment for a house or car. It could be used for retirement savings through the Roth IRA contribution. These things quickly turn – into +.
Even if you didn’t necessarily want to spend that money on these things, it could at least be spent on things that were truly satisfying when you looked back at them, like a meaningful day at the zoo with your family or gasoline for relaxation. day trip to grandma. These things go into at least a neutral column.
This exercise is not meant to get you hitting yourself. The truth is, everyone makes spending mistakes. If I go through my credit card statements, you better believe that I am going to mark some things with a sign -.
The real purpose of this exercise is twofold.
First, it helps you understand how much of your spending goes on things that you can completely forget about and that have minimal impact on your life. At the end of the month, people often wonder where all their money has gone, and the truth is, most of it goes to completely forgotten things with little impact. While it is easy to recognize this truth in general terms, this exercise makes it very specific and personal. It shows you how much of your spending is easily forgotten and ineffective. It even shows you what these costs are.
Second, it gives you a good idea of your future spending. For me, this is the real value of this type of exercise. It shows you, in the spotlight, how much money you are spending ineffectively and also tells you exactly where you are spending it . You can take this information and use it to improve your spending habits in the future.
How? Here’s how you can use this information to truly change your spending.
First, look for patterns in the data . Where do you often forget money? Is it in the bar? Gas station? A specific store? Site? Are there any products you buy often that you just forget about? Soda? Alcohol? Coffee? Entertainment? Look for things that show up over and over in your spending, and see if you can come up with a short list of some of these patterns.
Second, identify clear, concrete changes in your life that will cut your spending in terms of the patterns you notice. You have several clear patterns that will determine your memorable spending. What are you going to do with these things? For example, if you spend a lot of money on things that are easily forgotten on the Internet, consider removing your credit card number from online stores that you use frequently, especially those where you buy things that are easily forgotten. If you often buy sodas, alcohol, or other consumables that you simply forget about, make it a goal to get rid of those habits (it’s probably better for your health). If you find that a particular friend or social group is associated with huge costs, reduce the time you spend with these people and spend time with friends that do not require spending.
Third, make these changes. Ideally, you now have one or two real tangible changes that you can implement … so implement them. It can be tricky, so here are some tips on how to make them click.
First, remind yourself of these initiatives early in the morning every morning. Take a few minutes to think specifically about these goals. Place them on a large sticky note on the bathroom mirror so you can think of them as you brush your teeth, or place them as a lock screen on your smartphone by creating an image with these ideas. I find that looking at these focal points just before or immediately after meditation or prayer (which I do every morning) is very helpful in terms of anchoring these ideas in my skull.
Second, focus only on the present day. Don’t worry about past failures or the road ahead. Just worry about taking care of these things today . If one of your initiatives is to cut costs online, simply choose not to spend your money online today. If one of your initiatives is to quit drinking alcohol, focus on not drinking today and use other means to express your emotions. If you have an initiative that involves social change, make an active choice to spend some time raising a new friend or two today. Today is the main thing.
Third, evaluate today before you go to bed. As in the morning, at the end of the day, think about your initiative for the day. Have you managed to avoid drinking alcohol? Hooray! Success! If not, why did this happen? Making a mistake is not the end of your life, but it should be seen as an opportunity to find out why you made a mistake and focus on taking care of the reason behind the curtain. I believe that repeated setbacks means that I need to work on something else in my life as a daily goal, because there is another problem in some other part of my life that is not working correctly, so I need to solve this first. another problem.
Fourth, create (and continue) chains of success. When I work to establish a new “normality” in my life, it usually comes from consciously repeating a daily habit until it becomes so normal that I no longer need to think about it. I found that it starts happening around the 30-day mark, but doesn’t actually “fix” consistently, for at least 90 days of constant recurrence. To keep myself motivated, I use a “chain of success” system. I have a white board in my office where I list two or three top daily goals. There is a line of crosses next to each target. Every day that I successfully do this, I add an X to this line. If I fail, I erase the entire line . I look at this board a lot during my morning assessment of my daily goals because maintaining this X chain has a lot of psychological power.
Use these strategies together to make the changes you are looking for and actually cut down on the unnecessary waste of your life.
Finally, see how these changes will affect your spending in the next billing cycle. Skip a month and then take a close look at the first full billing cycle after you start implementing these changes. Go through this and do the same +, – and – exercises described above. Ideally, you will notice many positive changes, probably enough for you to notice immediately in your lower-than-normal credit card balance or higher-than-normal bank balance.
This is good. Really good. The best part? Since your costs don’t really matter to you, it’s easy to maintain. You can do this.
It is this type of cyclical pattern – looking for the mistakes you make, finding the actionable steps to fix them, taking those steps, and then checking the results – that underlies almost every kind of positive change people make to their lives. Changing personal finances is no different.
Avoiding memorable spending is an especially powerful type of change because you let go of things that don’t really matter to you and replace them with much more meaningful uses of your money, plus you can clearly see the impact month after month on your bank statements and accounts. by credit cards.
Try this little technique. You will be very pleased with the changes made to it.
Using Your Credit Card Account As An Alarm | Simple dollar