Where Does My Money Go?

How to Control Discretionary Spending

It happens to many of us. Pay day comes, we pay our bills and with any luck, there’s money left over to spend how we see fit. That’s discretionary income, and for many of us, it seems to vanish into thin air. Where does all our money go? Eating out, spontaneous stops at the grocery store and even small purchases like soft drinks and coffee add up fast.

The best way to control spending is to budget for regular expenses/bills and track every discretionary penny you spend. There are several ways to do this.

Keep Your Receipts
Keep all of your receipts for one month. Get yourself a shoe box, envelope or sealable bag, and every time you purchase something, put the receipt in there. If the receipt is not itemized, write down what you bought on the back. At the end of 30 days, add all the receipts to see how much you spent and on what. It may surprise you to see how many stops you make at the local coffee shop or at the grocery store for one or two items.

Spending Journal
Keep a journal of every penny you spend for a month or one pay period. Every time you purchase something, write it in the journal. You don’t have to write down your electric bill or mortgage, as long as you keep a budget for those items. Similar to the receipt method, a spending journal shows you exactly how you are spending your money and lets you know where you need to make adjustments.

Discretionary Account
Use a separate checking account/debit card earmarked for discretionary spending. Each pay period, transfer a set amount of money into that account. When it’s gone, you’re done spending until the next pay period. Be sure to opt out of overdraft protection or courtesy pay just on this account to keep yourself from over spending.

Cash Only
Withdraw your discretionary money from your account and use only cash for those purchases. When the cash is gone, you’re done spending until the next pay period.

Envelope System
Decide how much money you’ll spend each month or each pay period in major categories like Eating Out, Groceries, Gas, etc. Write one category on each envelope along with the amount of money you’re allowing yourself for the month or pay period. Put that amount of cash in each envelope. You can transfer cash from envelope to envelope as needed, but when the cash is gone, you’re done spending until the next budget timeframe begins.

The key to all of these methods is keeping yourself honest and making adjustments to keep the money from vanishing. Find the categories on which you spend the most money and set firm limits for yourself to keep spending under control. Next time you need money, you may just have some.