Finances Are Complicated: How To Know If You Really Have Your Spending Under Control

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If you were lucky enough to have financial education classes at school or work, you probably learned to save, invest, and reduce debt. But did anyone ever teach you how to spend money?

Living below your means is one of the most important factors of long-term financial success, but it can be tricky — especially as your income increases. I have quite a few clients who make a million dollars a year and spend all of it.  

In order to learn to spend your money well — meaning on your needs and things that bring you great value — ask these three questions:

  1. Are you spending more than you’re making?  

It sounds simple, but often it’s not. Our finances are complicated.

With various checking accounts, savings accounts, credit cards, mobile payment apps, and debit cards, it can be a challenge to stay on top of your spending. Add a partner into the mix and keeping track of your money gets even more befuddling.

If you answered yes:

To combat the confusion, use an online aggregator such as to organize and track your finances. Of course, you can also use a spreadsheet or even an old-school yellow legal pad to determine how much is coming in and how much is going out. Just do it!

  1. Are you adding to your debt each month?

Many of my clients think they are paying down their credit cards each month. But since they have multiple cards, have automatic charges hitting each month, and are adding new purchases, they don’t realize they not only aren’t paying the balance down but they are adding to the principal each month.

Their debt is slowly creeping up, and their net worth is slowly going down.

If you answered yes:

Make sure you aren’t adding to your credit card balances each month by tracking your overall outstanding debt on a regular basis.

  1. Are you overspending in your “danger” areas?  

Many of my clients way underestimate their spending, especially on restaurants. This is the first category to spot-check — not just dining out, but coffee shops, lunches, and fast food.

Shopping is another problem area for many people, since it’s so easy to swipe your credit card for in-store and online purchases.

If you answered yes:

Use a cash system for your areas of concern, such as shopping. Set a strict budget and set aside cash to spend only on shopping that month. Put the cash in a designated envelope in your wallet. When the envelope is empty, wait until next month to make any more purchases.

If you answered no to all of the above questions, congratulations — you might be in good shape. But take the time to review your finances and be sure.

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Spend on what matters most:


Save and invest the rest!

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