Where Does All of My Money Go?

Trisha Miller  | 

Living in financial comfort doesn’t simply include making money. Millions of Americans are comfortable with their income, but are still confused as to where their money goes each month. Long term financial stability is achieved when you examine your finances, acknowledge your financial weak spots, create a budget, and maximize your potential savings. This doesn’t mean that each and every penny has to be sent into retirement funds or savings accounts, but you should know exactly what your spending is saying about your future — and your creditworthiness.

What Does My Budget Look Like?

You make your bill payments on time. You have built up a fair amount of credit. You make financially sound decisions (for the most part), but at the end of the month you look at your bank statement with bewilderment. Why is that? Well, it could be due to a lack of budgeting. When you’re comfortable with your current financial status, it’s easy to wake up one day and unconsciously decide that you don’t really need a budget. However, budgets can help keep your finances in order in a myriad of ways — it doesn’t have to only be to pinch pennies.

For example, if your income allows it, you can actually budget for some extra luxuries, like shopping, entertainment, and vacations. Choosing not to get your finances in order is asking for trouble. Just because you have extra money during the month, doesn’t mean you should spend it however you like. Spending your money with a plan and a purpose will help you understand where your money goes and which areas you might be able to adjust to your liking.

With that being said, the first thing you will want to do is take a look at your spending habits for the last two or three months. Map out your bills and essential expenses that you know you have to pay each month. Then you can start putting certain types of expenses that pop up again and again into their own categories. Once you have those fleshed out, examine where your money is really going. Are you happy with your spending habits? If you feel like it could use some tweaking, now is the time to sit down and make those decisions.

If your priorities include vacationing once per year and going out to eat 4 or 5 times each month, that’s great! You just need to mark it in your budget. Start saving a small amount each month at the beginning of the year. So, when you go to plan your summer vacation, you already have a small nest egg and don’t have to take money away from the rest of your budget. You don’t have to plan every expense exactly, but if you want to allow for a few nights out, put aside a couple hundred dollars just for that part of your budget. Then, if you don’t end up spending it all, it can go right into savings or wherever your budget needs it most.

Is Automatic Bill Pay Hurting Me?

Another large reason that people feel like their money is going down the drain, is automatic bill payments. There’s something much more personal about manually making a payment, even if it’s online. You are face to face with your money and you know how much is being spent. With automatic bill pay, you lose that connection with your money. You don’t know how much was taken out unless you go back and check it and add it to your budget. Let’s be real, not all of us have time to balance our checkbooks regularly. So, what ends up happening is the money comes out, you don’t even notice it, and you keep spending as you normally would until something goes wrong. Maybe you don’t end up with as much as you thought you would have at the end of the month or perhaps you are forced to charge some things to your credit card when you would have preferred to pay with debit or cash.

Don’t get me wrong, automatic bill payments are convenient. When you have a stack of bills, it can take a chunk of time out of your day to sit down and address them all. However, I highly recommend that you make this a priority. If you feel like it’s taking up too much time, split it up into a couple days per month (or more) that you focus on your finances.

In addition to losing touch with your bank statement, automatic bill pay can sneak up on you in a couple other ways as well. Impulse purchases and services often store your credit card information each month. If you’re not checking your statement regularly, you might forget to end a service that you really don’t need. Now, that really does mean money right down the drain.

What’s more, certain services charge a fee depending on what type of card you use or how you pay. Paying straight through a bank account might come without a fee, while paying with a debit or credit card might cost you a few dollars each time. Again, that’s a few dollars that could have gone into savings. If you have a few fees incurred through multiple bill payments you could be wasting more money than you think. Five automatic bill pays per month with a fee of three dollars each means you’re losing $180 every year, just to automatic bill pay.

What Should Saving Look Like for Me?

No matter what age you are or what your financial status is, you should be putting money into savings — especially once you have a few large investments under your belt. If you own a car (or two) and/or own a home, you now run the risk of something breaking down or needing repair. It’s essential to have a savings account with enough money to cover any repairs you might have to pay for out of pocket, and then some.

When you’re younger, saving is pretty far from your mind, but as you get older you might make the decision to save a small portion of your income. If you have some disposable income, that you’re using for “fun money” like we discussed earlier, why not take a chunk of that and put it into savings? Maybe you are already saving, but you didn’t quite know how much you could be saving until you examined your budget. There’s no better time to bulk up your savings. Having that cushion can really take stress off of you when you’re thinking about those big purchase decisions later on.

In addition to a regular savings account, you’re probably working on a retirement fund. The closer you get to retirement, the more imperative it may become to stash away some savings into a retirement fund. You don’t have to just have one. Most people that choose to save for retirement are using a 401(k), which is just fine. However, if you’re getting closer to mid life and maybe you don’t have quite as much saved as you would like it could be time for another retirement fund.

First, examine your current contributions to your retirement fund. If they aren’t as high as they could be, you could be losing out on your own savings and employer contributions. Once you’ve optimized that, you can start putting as much as you can comfortably afford into your own savings account or another retirement account. It’s not uncommon for people in their twenties to put about five percent of their earnings into 401(k) accounts, but you might decide to be a little more aggressive. Work out a percentage that is comfortable for you, without making your budget too tight. Then, sit back and watch retirement come to you.

Saving looks different for every one of us, but each of us has the power to take control of our finances right now. By doing so, you can not only increase your savings, but save some for retirement and for entertainment as well. We all know what the feeling of drowning in bills and wondering where your money has gone. However, in many cases, you can stop that from happening ever again by simply taking charge of your bank account. Remember, budgeting doesn’t mean you have to pinch every penny that you have. It just means that you should have control over your money, not the other way around.


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Trisha is a writer and blogger from Boise, ID. She is a dedicated vegan, an avid gamer, cat lover, and amateur SFX artist.

This post was updated July 11, 2017. It was originally published June 10, 2017.