FLM Step 18: Frugal Homemaker on where the money goes

In honor of Financial Literacy Month, we created a microsite that offers 30 simple steps to financial wellness–one for each day of the month. To enrich the experience, we asked some amazing people to guest post during the month on a topic that is related to the day’s step. Their dedication to financial literacy is truly inspiring! Today, the author of Frugal Homemaker Plus talks about tracking expenses.

You know the drill. On Monday, you head to the ATM and take out $50, just to have some cash on hand. That money will last at least a few days, right? After all, it’s not like you’re spending all that much. You only buy small things, like a coffee in the morning, maybe lunch out or a snack at work in the afternoon. It does not add up that quick, does it? The money will last you all week!

Yet at the end of the day, all you have are a few pennies and some lint in your wallet the place of the cash. You don’t remember buying anything of consequence. What happened?

Where is all that money going anyway? It is amazing how much money we spend without realizing it. $4 here, $20 there…by the end of the day, your bank account is $50 lighter, yet you have nothing big to show for it. Keeping a record of your spending can help you see where the leaks in your financial life are.

Everywhere you look, there are tips on how to save money on the big things- cars, homes, new furniture, college…but it’s really the day to day costs that drain our bank accounts. It’s great to save thousands on a car, but how often do you buy a car? How often do you refurnish your home? Those savings are wonderful and important, but it’s just as important to be mindful of the small expenses.

I often hear from people say that they’ve cut out all unnecessary expenses, but they’re still short at the end of the month. This is where tracking your expenses- every single thing you buy, from your rent to each pack of gum- can help you see what is going on in your financial life. You might not buy lattes every day, but you do put .50 cents into a vending machine for your afternoon caffeine fix. Assuming you get one five days a week, that’s $120 a year. A two dollar magazine at the checkout line once a week will set you back $96 each year. These are just random examples of things that people spend money on, but it does add up! If you track your spending, it is likely you will find your own version of vending machine sodas and a magazine. We don’t usually remember each penny that we spend unless we write it down. We just know that we somehow spent $50 in one day, but are not really sure what it went to.

Is that to say that buying soda from the machine or getting a magazine is an evil waste of money? Not at all! However, if you are trying to get out of debt, or have larger goals, seeing these small expenses in black and white can be a bit shocking! When you are popping two quarters into a machine, it does not seem like a huge expense. When you write it down each time you do it, you will start to notice how often you are doing it. When you see how much that small expense is adding up to over time, that “small expense” seems less innocent. Bringing a soda from the 24 pack at home and subscribing to the magazine will usually save you some of that money- and you still get your treats. Writing down expenses will help identify those areas that you can cut back on or find less expensive ways of enjoying. Knowing what you’re really spending is a powerful tool in your journey to financial literacy!

Catherine's blog, Frugal Homemaker Plus, is about her journey to become 100% debt free by 2012, including (yes, including!) the mortgage. Simplicity and frugality is her motto.


Kim McGrigg is the former Manager of Community and Media Relations for MMI.

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.

  • Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.

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