Looking at a quick Twitter poll it seems people are interested to read about acknowledging one’s expenses and budgeting for clothes, so let’s dive straight into it!
— Brendan (@your_money_blog) March 13, 2018
Acknowledging your expenses is relevant to you whether or not you budget. It’s probably more relevant to those who don’t yet have a budget as it may be quite an eye-opener to see how much you really spend on various things. However, if you have a budget you may find that there is a category where you always overspend, or perhaps you have a “general” category and that is where you should focus.
What does it mean to acknowledge your expenses?
You’ve probably heard they saying that admitting you have a problem is the first step to recovery. This is true when it comes to your spending habits because unless you can acknowledge and admit to your expenses, you can’t really do much about it.
We all have something that we feel we spend too much money on. Clothes, eating out, make-up, coffee, etc. It’s not necessarily the amount of money we spend but rather the conscious action of down-playing the expense. So perhaps you spend R300 on takeaway coffee but if your partner or colleague had to ask about it you would say “oh, I hardly buy any” or “it’s probably not even R100”. At the same time you may spend R1,500 on clothes each month but you are confident to tell people that and defend yourself when questioned. So for now think about the expenses you are hiding or shying away from; the ones which you are not prepared to admit to. I’ll refer to these as “underground” spending.
Get the facts straight
To make this exercise meaningful you will need to get the facts straight and find out how much you really spend on your underground categories. It’s no use just trying to guess; these are expenses that you generally don’t like to admit to so you will most probably under estimate. The best action to take is to start tracking your spending each day for the next few weeks.
If you generally use a credit card or app to make payments you may be able to look at past statements to get a real idea of your spending. If that sounds like too much admin (which it probably is) then rather just start tracking your spending from right now! Use a journal or just a notes app on your phone but keep track of every time you spend money on your “underground” item. Do it for at least 2 weeks but a month is probably better.
Now that you know how much you really spend it’s time to decide whether you’re happy with the amount or not. You don’t necessarily have to cut down on the expenses, but you need to understand how it is affecting other areas of your finances. If you don’t have a budget then it’s probably a great time to set one up and you can look at the 5 simple steps to set up a budget.
It’s also a perfect time now to look at your finances holistically and to realise that you only have a limited amount of money. If you spend more money in one area, you have to spend less somewhere else. You may think that things will just work out, but unfortunately it’s not that easy. Imagine having a big piggy bank that is full of your money (in fact you can count your money). Now when you use this money for something you obviously have less to use for something else.
I know many people don’t like that idea. The idea of running out or not having enough is depressing and that’s where credit cards and debt comes into play. But, for right now pretend that you can never have debt. You really have to prioritise your money and decide carefully how much can be spent on what.
Spending money on these “underground” things is not necessarily wrong and this post isn’t meant to make you feel bad. Rather this post is to help you realise how much you are really spending and to understand the consequences. Equally important though is understanding the reason why you don’t like to admit your spending.
When you think about these “underground” expenses (these ones that you don’t own up to) you need to try to understand why you’re afraid to admit the amount of money you spend. Do you feel guilty? Do you know that it’s a bad choice? Do you hear your parents scolding you? Identify the feeling and really think about it.
And when you next look at your budget adjust it accordingly with these true expenses and be honest with yourself.