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Credit cards can be very useful things. You can earn cashback, earn miles and they’re about the most convenient spending tool available.

The downside to credit cards, besides the interest you pay if you don’t pay off the balance each month, is that it is so very easy to lose track of how much you’re spending.

Think about the last $100 you spent using your credit card. What did you spend it on? What about the last $1000? It’s scary to realize you could have no idea where $1000 went - yet most people don’t remember. Even scarier is finding out at the end of the month that you’ve overspent, again, and paying off your card becomes a stressful event.

So, where does the money go?

If you’re brave enough and if you feel that your money is controlling you, here’s a quick way to examine your expenses and gain control over your money:
Begin by writing down your expense categories or create a simple spreadsheet:

* Home
* Utilities
* Food
* Family
* Medical
* Transportation
* Debt
* Entertainment
* Pets
* Clothing
* Miscellaneous
* Investments and Savings
* Donations

Take a few minutes to review the categories listed. What categories can you eliminate? What categories will you need to add? By reviewing your credit card statements, checkbook register, and your bank accounts for the past three months you can find this information. Take a look at each category that is right for you and add any sub-categories you might need. For example, under Transportation you might have the following sub-categories:

* Public transportation costs
* Insurance
* Car Payment
* Maintenance

Take a month or two to track your spending using the various categories you’ve determined. This means keeping track of all your spending, keeping receipts and not letting any dollar go untracked. You need to know how much you spend on everything. You need to know where your money goes.

Do not to limit your spending or spend less than you normally do. The point is to gather information. If you normally go out to dinner three times a week, don’t all of a sudden go out to dinner just once a week simply because you’re tracking it.

Once you have completed this experiment you might be surprised to find for example that you spend $1000 a month on groceries and only $100 a month on entertainment, or vice versa. Maybe you'll find that you spend $1000 on going out to dinner. It is guaranteed to be an eye-opening experience. After careful evaluation, you’ll most certainly find there are areas where you are overspending and can cut back.

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  1. Dan Englander // 4/15/2008 10:45 AM  

    The best way to keep track of everything you are buying, is, of course, to organize every receipt you get. Shoeboxed is a great service online that can help you organize (for free) every receipt that you have. There is also a paid service (Receipt Mail-In) where they scan in your paper receipts for you, so you don't have to spend time in front a scanner. More info at