Overtime, I’ve realized that while big ticket items (car, education) and lesser big ticket items (TV, new bike) can visibly hit the pocketbook quite apparently, in that you can point to a credit card statement and say “oh, it’s so high since I just paid off my tuition,” it’s the small items that can invisibly hit the pocketbook. Symptoms include but not exhaustive: feeling that you should have had more to save at the end of each month but not and wondering where all your money went.

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?

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.

Bonus for reading this far: My personal workflow is to use mint.com, which is effectively an aggregator for all your financial accounts. I won’t get into the details of the security of their approach, but suffice it to say that I feel comfortable enough to use it. It will download all the transactions you have and attempt to categorize it for you. You can easily go in and change the categories, add new categories, etc… saving you a lot more time than doing the spreadsheet approach by hand. Even more so, it can show you how your budget has evolved month by month. It’s a great time-saving tool in keeping track of your finances, especially the little things.