As a Spender, you probably aren’t writing down how much money you spend. If you did so in the past, it may have overwhelmed you to the point where you quit because you didn’t want to face the damage. You also may be making a lot of transactions and sitting down to record them could take days. But it is important that you do this in order to figure out what your starting point should be, similar to weighing yourself before you go on a diet.

Finding your starting point may be the hardest part of your journey to recovery. You start to see where your money is going, and that starts to show you your value system. It also shows you the damage that you’ve done to your money.

Julie came into the Financial Renovation Community with a lot of money damage. Over $40,000 of debt. She had never budgeted before and had no idea where to start. When she started going through my online course, she admitted to having no idea how much money she was making or spending. She would spend freely and hope and pray that her card wouldn’t get declined at the register.

She was an overspender and was sick and tired of wishing and hoping that she could pay her bills on time. I have three in-depth videos in my online community where I show you easy ways to take inventory of your spending. I have spreadsheets and programs to help you figure this out fairly quickly. She was absolutely shocked when she took inventory of her spending, suddenly realizing that she was spending over $3,000 more per month than what she was making. No wonder she was having problems paying her bills.

After coming to grips with her spending and finding many ways to cut back those expenses, Julie went on to pay off $2,000 in debt and put $1,000 into an emergency savings account. Julie had this to say about her experience: “Lauren has put together a great plan to help others get out of debt. She is always encouraging you and never judging or shaming you for your debt. She uses very simple and understandable ways to help you get to your goal of financial freedom.”

Do you want to be like Julie and take control of your finances? Here are the steps you need to take to make an inventory of your spending and learn how to make things better.

First, print out the most recent three months of credit card and bank statements and staple them all together. Next, enter each amount onto a worksheet of some kind. This will help you to find out how much you’ve been spending. Be sure to put each transaction into a category.

I can guarantee that you’ll be shocked at how much you are spending in certain categories. When Mark and I did this the first time, we couldn’t believe how much we were spending on food. Even though there were only three of us at that time, and one was a toddler with a small appetite, we averaged $1,000 per month (sometimes more). We would eat out often because with Mark getting home from work at 6:00 p.m., it was easier for us. We would order a lot of pizza, eat out at restaurants, and then go to the grocery store once or twice per week. We weren’t eating at home much, so the food from the grocery store would spoil, and I would have to go buy more. I estimate that we spent about $600 per month eating out and about $400 per month at the grocery store.

Once you start writing everything down, realize that this exercise is going to take time, but why do you want it? That is what you need to come up with—the why—when things get hard. When you want to quit, think about why you are spending the time to track this. Paste that why everywhere you can, and remember it to help fuel this process.

Here are the categories you are going to use when writing down those transactions:

Using the statements you printed out, write each transaction down in its proper category. I’ve provided you with a worksheet to help you out. You can find it in the back of this book (see Appendix C).

Go through every statement, add up all the categories on either the printable sheet or the spreadsheet, and then come up with a total.

Before you do this, be aware that a few things may happen:

1. You may discover that you are even more broke than you thought. Be warned, this might feel pretty depressing and may make you want to quit before you even get started. If that happens, be thankful that you know the worst now and continue in this exercise with me. It will get easier, and soon you’ll see a light at the end of the tunnel, I promise. Remember, I’ve been there before you!

2. You may be shocked at how much money you’ve been spending. This is normal, and I expect you to feel this way.

3. You may discover you are actually in pretty good shape, and once you learn how to cut back on some of your expenses, you can start to pay down more debt! This is great news!

Whichever way you feel, just know that you aren’t alone. This is the hardest part of getting started, so let’s just rip that Band-Aid off as quickly as possible and get it over with, so the hurt doesn’t linger.

Now that you have all of your transactions written down from all your statements, take the total for each category and divide by three to figure out the average amount spent in each category.

Here is an example of what this can look like:

Month 1:

Food: $1,000

Gas: $200

Eating out: $400

Miscellaneous: $550

Month 2:

Food: $1,200

Gas: $300

Eating out: $450

Miscellaneous: $350

Month 3:

Food: $1,150

Gas: $250

Eating out: $500

Miscellaneous: $500

Averages from the three months:

Food—1,000 + $1,200 + $1,150 = $3,350 divided by 3 = $1,117

Gas—$200 + $300 + $250 = $750 divided by 3 = $250

Eating out—$400 + $450 + $500 = $1,350 divided by 3 = $450

Miscellaneous—$550 + $350 + $500 = $1,400 divided by 3 = $467

The average category amounts are the numbers that we’ll use to create your first budget. Remember, the goal of a budget is to be able to stick to it, so if we just pull random numbers out of the air, you are guaranteed to fail. I believe this is the biggest reason people fail at a budget, because they just use numbers that sound good but that have no relationship with reality.

If we were to set up your budget using the examples above, this is where we would start with each of those categories:

Food—$1,120 (I rounded up a bit; we should be able to get this number down a lot!). I round up so I can take cash from a cash machine in twenties. This is not a necessity, but I am thinking of cash withdrawals from an ATM. If you were to go into your bank, request the exact amount of money needed.

Gas—$260 (rounded up to an even number).

Eating out—$780 (again, rounded down to an even number—we should be able to cut this back a lot, too!).

Miscellaneous—$480 (rounded up).

People ask me all the time, “What is the right amount to budget for X, Y, or Z?” My answer is always, “I can’t tell you that,” because the right amount is different for everyone. We’ll find that right number by looking at your past spending, and use the numbers we come up with to create your first budget. Over time, we will work on getting that amount down, and the correct number you should use in your budget will be lower than what we start with.

By calculating your averages, you’ll be able to start a budget without feeling the constraints of one, because you are currently spending that amount of money. The first step in a successful budget is making one; the second step is actually sticking to it. Once you’ve been able to stick to the budget for two or three months, start to cut things out and reduce where needed.

Don’t go crazy and start taking things out of the budget just yet. We need to make sure that we have set it up correctly, so hang on to these numbers and let’s begin.

1. Print out your last three credit card and bank statements.

2. Write down every single transaction and put it in its category.

3. Figure out your average monthly spending in each category.

4. Use those averages to create your budget in the next step.

Chapter 18

Recovering Spender Step 5:

Take an Inventory of Your Spending

ACTION STEPS FOR THE RECOVERING SPENDER

STEP 5