Spotting the Drift: Methods for Identifying Your Spending Habits

Do you often find yourself wondering where all your money went at the end of the month? Identifying and understanding your spending habits is the first step towards gaining control over your finances. In this blog post, we will delve into methods that can help you pinpoint how you’re spending your money, and ultimately set the stage for making mindful financial decisions.

The Necessity vs. Desire Checklist

Often, we make spending decisions on autopilot, without considering whether the purchase is a need or a want. Create a simple checklist that divides your expenses into two categories: necessities and desires. Necessities are essential for your well-being and daily functioning, whereas desires are not critical for your survival. This exercise can help in bringing awareness to the things you might be spending on unnecessarily.

Use a Budgeting App

There are plenty of budgeting apps available nowadays. Mint, YNAB (You Need A Budget), and PocketGuard are some popular ones. These apps can connect to your bank accounts and credit cards, automatically categorizing transactions and providing insights into where your money is going. This is an effortless way to keep tabs on your spending habits.

The Envelope System

This is an old-school method, but it’s still relevant. Create envelopes for different categories of spending (e.g., groceries, utilities, entertainment). At the beginning of each month, put cash in each envelope according to your budget. Only use the cash from these envelopes for the designated expenses. This method can be especially helpful in curbing impulsive spending.

Setting Spending Alerts

Many banks allow you to set up alerts for when your spending in a certain category exceeds a threshold you set. This can be a wake-up call and prompt you to examine what led to the overspending.

Keep a Spending Journal

For one month, write down every single purchase you make, no matter how small. At the end of the month, review your journal and categorize the expenses. This practice can often lead to startling realizations about where your money is going. It’s like keeping a food diary – sometimes you don’t realize how much you’re consuming until you see it written down.

Review Bank Statements

Take an hour every month to go through your bank statements. Look for patterns or any irregularities in your spending. Are you spending too much on subscription services? Did you make any impulsive high-ticket purchases? Reflect on whether these spending patterns align with your financial goals.

Ask for Feedback

Sometimes we’re blind to our own habits. Don’t hesitate to ask a close family member or friend for their observations about your spending habits. Just make sure it’s someone you trust and who has your best interests at heart.

Reflect on Emotional Spending

Are you spending money to relieve stress or to reward yourself? Emotional spending can be a significant drain on finances. Reflect on how your emotional state affects your spending choices and consider alternative ways to manage emotions.

Identifying your spending habits is crucial for financial wellness. By employing these methods, you’ll gain a clearer understanding of where your money is going and be able to make more informed decisions. Remember, the goal isn’t to deprive yourself but to ensure that your spending aligns with your values and long-term objectives. It’s about being the master of your money, not its servant.


  • Lily Kensington

    Lily Kensington is a financial psychologist, a proud member of the ANZA Psychological Society, and a passionate advocate for financial wellness. A former high school English teacher and psychology graduate, Lily brings a unique perspective to her writing that blends the intricacies of psychology with the world of finance.Over the past decade, Lily has dedicated her life to helping individuals and couples navigate their emotional relationship with money. Her empathetic and intuitive approach, honed through her counselling practice, breaks down complex financial concepts into relatable and practical advice. Lily's writing often reflects her personal journey as a single mother, providing valuable insights and support for fellow single parents navigating the world of personal finance.In addition to her numerous contributions to wellness and personal development blogs, Lily is the author of the book "The Heart of Money: A Psychological Guide to Financial Wellness."In front of the camera or behind the pen, Lily's mission remains the same: to help others achieve financial peace by understanding the psychology of money.

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