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Research Your Spending Habits To Create New Financial Goals

Erik Folgate

The end of the year is here, and if you can find time in between last-minute shopping and spiked eggnog, then take an hour or so to reflect back on how you spent your money this past year. Creating yearly financial goals is a great habit to form when building a healthy financial future. Even if you don’t reach all of your goals, if you set them too high, or set them too low, they serve as a motivational tool throughout the year to strive toward something. If you don’t know where to start when it comes to making financial goals, start with what you spend and how much you spend on it.

Print out all of your checking account statements for the past year

How much were you spending on clothing? How much did you spend on eating out at expensive restaurants? How much did you spend on eating out for lunch? How much did you spend on the house or your kids? Get a ball park figure on all of these types of questions.

Now evaluate the amounts

When you find out that you spent $300 a month on eating out for lunch, a great goal for 2010 is to start bringing your lunch with you to work 10 times a month. When you find out that you were putting clothing purchases on a credit card and not paying off the balance at the end of the month, a great goal for 2010 is to start a clothing budget fund and only pay cash for clothing.

Write Your Goals Down Somewhere

Don’t make mental goals. Write them down so you can reference them at the end of 2010. Then, you’ll be able to compare your results and see what kind of progress you made.

Make Quantifiable Goals

Don’t just make a goal that you will decrease your spending on eating out. Make a specific goal like, “I will decrease my spending on eating out from $300 a month to $150 a month.”

I know that goal setting sounds so nice, but when it comes down to it you rarely follow through with them or follow up on them. Goal setting is such a mythical topic that we all talk about, but we never do it. The way to avoid this is by keeping the goals simple, make them attainable, and post them somewhere visible like your refrigerator door or on your work desk.

Categories: Spending and Saving

Erik Folgate
Erik and his wife, Lindzee, live in Orlando, Florida with a baby boy on the way. Erik works as an account manager for a marketing company, and considers counseling friends, family and the readers of Money Crashers his personal ministry to others. Erik became passionate about personal finance and helping others make wise financial decisions after racking up over $20k in credit card and student loan debt within the first two years of college. Another one of Erik's projects is the site, Stuff We Google.

Learn more - including co-founders Andrew Schrage and Gyutae Park.

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Comments

  • Elizabeth I

    I think it is crucial to figure out what you have spent the year before. However, you need to figure out what you anticipate spending for the current year to make an accurate budget. Take clothing for example, if you spent $2,000 last year on clothing. This year, make a list of all the items you need to purchase (ie. replacement clothes for work, etc). Attach a cost to each item. Then add up the numbers. This would be a realistic budget.

    At this point you have to do some more “analysis”. If the total of “needs” is $1,500, then you need to determine if you are comfortable with this number. If it is too high, then the list of items to purchase needs to be relooked at and changed. If it is low, then there is additional money available for wants.

    Hence, when you go shopping for clothes, you will know two things 1) your total budget available and 2) the items that need to be purchased. Thus you will stick to your list. It is like having a grocery list.

    This helps to avoid the pitfall setting aside a set amount per month for clothes or spending allowance for clothes. This gives the feeling that there is around $125 for any clothes purchased per month and up to $125 can be spent per month. Thus, there is the temptation to buy clothing items that may not be needed because the money is “there”, and when clothing items are needed either the money is not there or the monthly amount does not cover it (ie. you need to buy new work pants at $80 a piece, but if you purchased two pairs in one month you are “over budget”. Under this constraint, you can only buy one pair of pants a month, which can be a problem if you need two pairs at once).

    This kind of planning and tracking can be used for everything. Once I started doing this I made better purchasing choices and spent less overall.

  • http://untildebtdouspart.blogspot.com Techbud

    I’m currently tracking all of my families spending for the month to see where all of my money is being spent.

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