Track your spending
The first and most important step to a debt free lifestyle is tracking your money. Where it comes from and where it goes. If you know where and how every penny is spent, then you can begin the journey toward financial responsibility.
You can use any kind of method you want from a checkbook register to Excel, Quicken, your cell phone or even a notebook. The point is to diligently track every cent you touch, whether it’s physically or electronically. This exercise is about developing the habit of tracking your money so you can make informed decisions later.
There are two ways to go about this:
- Keep all receipts and update your log at the end of the day or week
- Record every transaction as it happens
Do what works best for you and your lifestyle, but make sure no purchase goes unrecorded. Even if you find a dollar on the ground, mark it down.
Use this information to categorize your spending habits so you can see exactly how much money is going towards new shoes or Starbucks. Once you are adept at tracking your spending habits, you can start making lifestyle changes and continue on your journey toward economic freedom.