Posted: 10:49 a.m. Wednesday, June 26, 2013
Do you often feel like you are closely tracking your expenses, but find out at the end of the month that you’ve frittered away hundreds of dollars and don’t know how it happened? Unfortunately, many people who conduct all of their financial transactions online can experience this problem, which causes frustration and becomes a major obstacle to saving money.
I recently discussed spending and saving habits with a man who appeared to be well organized, but said he was living paycheck to paycheck and couldn’t determine how he was unable to save. After examining his finances, I noticed that he made numerous transactions online every month that made it difficult to determine all of his expenses.
When I scrutinized his debit and credit card statements, I found the following expenses:
Over a three-month period, he was spending about $300 each month for non-essential items. Instead of saving $900 each quarter — or $3,600 a year — these entertainment charges were turning into a major expense.
I made several recommendations to help him limit his spending and improve his savings. For starters, he was using several debit and credit cards to charge these expenses, which made it next to impossible for him to track his expenses.
I have one central credit card for all of my business expenses, so I suggested that he do the same. By having any entertainment charge on one card, he’ll quickly know how much he’s spending during any month.
Of course, my main recommendation was to limit his spending on entertainment items, particularly his impulse spending. We discussed other entertainment options, including spending more time with his friends, jogging at the local park and simply getting away from his computer and other electronic devices.
During our last conversation, I know he was making progress, though he’s still tempted to use his cellphone or iPad when he sees an interesting game for only $1.99.
But after realizing that he was spending $3,600 a year on games and other entertainment that have little value, he knows how to organize his expenses. It’s allowed him to set new savings goals that will eventually enable him to become more financially secure.