Spending Summaries—Why I Changed My Mind

Spending too much? (Aren’t we all?)

Here’s why old-fashioned spending summaries are so effective in helping you to control your spending.

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Hey, I’m an open-minded guy. I’ll admit when I’m wrong. I’ll change my mind when it’s merited. Ask my six ex-spouses. Kidding. I don’t have six ex-spouses.

For example, I was wrong about the merits of spending summaries. I used to kind of dismiss them arguing, with some good sense,

“As long as you’re saving the appropriate amount, who cares how you’re spending the rest? Doesn’t make any difference.”

So, what changed? Two things. One; Many people successfully used pay-yourself-first strategies to build their retirement funds, BUT simultaneously spent too much and ended up running up credit-card and line-of-credit balances. They needed to control their spending and old-fashioned spending summaries are still the best way to do that.

Not budgets, spending summaries that yes can lead to budgets. Two; Spending summaries, by letting you see exactly where your dollars are going, help you to improve your spending efficiency. What’s that mean? You will quickly start asking yourself, “Did I really get my money’s worth from that purchase? Are there better ways I could have used my bucks?

Did I get as many joy units per dollar for X as I would have for Y?” Nobody uses these, nobody, especially when they do them right—full detail over at least two months—and doesn’t benefit dramatically from the process. Nobody.

But here’s the key piece of advice you truly won’t get elsewhere. I mean that, you won’t. Do your spending summary by hand.

Don’t use an app. Don’t use a spreadsheet. And no I’m not some Luddite out of the 60s. Well, actually, I am out of the 60s. But when you enter all your data by hand—your income, your deductions, every one of your expenses, even a coffee, even a chapstick—it optimizes the learning. It slows you down. It makes you think.

Trust me on this. I’ve seen it proven many times in real life. Get some Bristol board. And of course, record what you paid for.