The reason you can’t identify where your money went is not because you’re necessarily daft, it’s just that it’s much harder to keep track of 20 items that add up to $500 instead of a few items that add up to$500. And just because you got more bang for your buck with 20 items, you still need to ask yourself: of those 20 items you bought totaling $500, how much was necessary? It’s for this reason, that it’s critical to keep track of your finances. Keeping track of your finances is not loading up the your four credit card websites and your two bank websites and see if there were any peculiar charges. Keeping track of your finances means that you have buckets for your spending. You have your fast-food-splurge bucket. You have your grocery bucket. You have your car payment bucket. You have your going-out-to-drink bucket. You have your seeing movies with friends bucket. You have your in-your-underwear-shopping-on-amazon-at-2am bucket. Keeping track of your finances means you must be able to categorize every single transaction you perform into one of your existing buckets. Sitting down and coming up with every conceivable bucket you need a priori is a sisyphean task. However, what is doable and needs to be done is that you need to go through every single credit card and bank statement you have for the past three months (if not more) and categorize it. You can use paper and pencil, but I recommend your preferred spreadsheet program in order to do this. A free one you can use is the spreadsheet program by Google. Having gone through this process (I anticipate it taking at minimum five hours and more likely a couple days), you will get a much better idea of how your finances actually are. You will notice, for example, that you’re spending upwards of$500 on just going out for drinks in a given month. You most likely didn’t think you were spending this much, since $10 here and$14 there don’t really seem to add up to $500. But,$10 here and $14 there, extrapolated to the rest of the month, does add up to$500. At this point, I would take a deep breath. When I did this exercise before and got to the “how much I spent in each bucket” stage, I was having mini-anxiety attacks about how my money was just bleeding out. That being said, you did a hard step and deserve some congratulations.
As the PSA from G.I. Joe would say, “Now you know, and knowing is half the battle.” With this knowledge, you can now take proactive steps in curtailing your spending on the little items, e.g., you will repeatedly tell yourself “I don’t need this {random $10 item}” knowing that those$10 items will easily add up to a much larger tab in the end.