Why does it always seem to happen? You make enough money to cover your bills and necessary spending with some even leftover… yet at the end of almost every month, you find that your bank account is lower than where it began… either that or your credit card balances are higher. So where does it go? You don’t feel like you spent that much money but’s it’s clear that you did.

Some people are Spenders and know it. Some people are Savers and know it. But some people think they are Savers when they’re actually Spenders. And that is a dangerous place to be in as money will leave your bank account in places that you never expected – or as I like to call it, hemorrhaging money. If you struggle paying close attention to your finances or do not budget, you are throwing money away and not even realizing it.

In 2006 when I was in full-on Spending mode, I couldn’t tell you how much I was spending anywhere. I wasn’t keeping track of when I was swiping my credit card, or how much each purchase was. It’s not that I didn’t care, I did care, but I did not want to be faced with the reality of what I was doing to my family or our finances. Doing something like a ‘Spending Inventory’ scared me, intimidated me, and overwhelmed me. I just couldn’t face the facts. But, once the pain of staying in debt became greater than the pain of changing my spending habits, Mark and I decided to make the changes we needed to alter our financial future.

To see if you are hemorrhaging money, and to assess your current financial health, you need to do a Spending Inventory. It’s kinda like weighing yourself before you go on a diet. The numbers don’t lie. I recommend using the past three months to give you a better idea.

5 Steps to begin a Spending Inventory:

1. Print out the most recent three months of credit card and bank statements.
2. Next, enter each transaction onto a worksheet of some kind that you’ve split up by category. This will help you find out how much you’ve been spending in each category. You can do a Google search for ‘spending categories’ and come up with a decent recommended category list.
3. Continue to go through every statement and put each transaction in a category
4. Add up the totals from each category.
5. Divide each total by three, so you can get an average of how much you’re spending in those areas over 1 month.

I can guarantee that you’ll be shocked at how much you are spending in certain categories.

A few things may happen after you do this:

• You could discover that you are even more broke than you thought, but don’t give up! There is light at the end of the tunnel.
• You could also be shocked at how much money you’ve been spending. This is normal.
• But you may discover you’re 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! When I realized that we were in $40,000 of debt, I took a deep breath, had a good cry, and took the first steps. 4 years later, we were completely out of debt with no chance of heading down that road again. I remember how we couldn’t believe how much we were spending on food!

Once you have those averages figured out, you can use those numbers to create your first budget. Remember the goal of your budget is to be able to stick to it. So, by using this 3-month-average method to get your first budget, your figures will at least be in the ballpark. Then start to cut things out and reduce where needed.

It can be very shocking and emotional to see those spending figures for the first time but don’t lose hope. This is only your starting point, and I promise once you take an inventory of your spending, and stick to that first budget you made, you’ll start making financial progress right away.

The only way to know if you are hemorrhaging money is to look at your actual spending. And even if you are pretty good with money, I still think you should give it a shot. Maybe you’ll notice one or two small things that will allow you to save $40-$50 a month. That is well worth your time.

You can find out more about taking an inventory of your spending in my book The Recovering Spender.