Where does all the money go? (And a present to help you save more!)

This is probably the question we get the most. This, and similar ones like, I’ve started earning more but where is all the extra money going?? And, how do I save more of my hard-earned money?

Where does all the money go? (And a present to help you save more!)

This is probably the question we get the most. This, and similar ones like, I’ve started earning more but where is all the extra money going?? And, how do I save more of my hard-earned money?

Earning more money can help you save more, but how often do you get a pay rise or kick off a new side hustle? Usually not often enough. And even when it does come along, the extra can ‘disappear’ thanks to higher costs of living. Plus, while a bigger salary is always awesome, it doesn’t help you understand where all your money is going.

Understanding how much money you really need, comes down to two things:

1. Finding out what you currently spend your money on, and
2. Aligning your spending with your goals and what you value

Read: Defining sufficient: how much is enough?

Now, another part of saving that is helpful to understand is that, when it comes to saving money, we’re all fighting an uphill battle. Why? Because our brain rewards us when we make a purchase by releasing endorphins and dopamine. That instant reward gives us a ‘rush’ which outweighs self-control and practical financial considerations. This process can even lead to addictions like smoking, gambling and eating.

So, we approach spending money just like any other addiction: by creating barriers to help you to make better choices. If you are trying to become healthier and have junk food in your kitchen, you’re almost certainly going to eat it. If there is no junk food in the kitchen but there are other healthier options, the chances of you making the effort to go to the shops for a junk food hit are a lot lower. When you work backwards from how you made the choice to eat healthier, you made a list of things to buy at the shops, effectively a plan. 

Money is no different – if you have a plan and a goal, then you give yourself a conscious choice between buying a materialistic widget which gives you a quick rush or putting the same amount of money towards that trip on your bucket list you dream of.

The first step of your plan is – a Budget. Yes, that dirty little word! But, before you stop reading have you made the classic assumption that a budget is about restriction? Spending as little as possible and being really frugal? Consider rethinking about the purpose of a budget to be about understanding where your money flows and if it’s inline with your values. Start by focusing on how much are you ACTUALLY spending, not what you HOPED you were spending, and see if you are comfortable with that.

Here’s our pressie to you – the SF Budget Tool! It will help you figure out how much you are spending, what you’re spending your money on, and how much you have leftover so that you can really understand whether your spending matches what you value.