Using Your Credit Card Bill as a Wake-Up Call

Here’s a little exercise for you to try out. Take out your latest credit card bill from your most frequently used credit card. Print it out if it’s an electronic bill; otherwise, just grab a pen and put the bill on the table in front of you.

Now, go through each item and ask yourself a couple of simple questions about each one.

“Was this thing a necessary purchase?” If it is, put a little + beside that item on your bill. Easy enough – these expenses should be obvious.

“Was this purchase not necessary, but actually really fulfilling when I look back on it?” Just leave it blank. Don’t mark anything beside it.

“Was this purchase not necessary, but not really all that great when I look back on it?” Put a – beside that item.

“I don’t remember what this item was at all, but I’m pretty sure it wasn’t important.” Put a – beside that item.

Now, go through and total up all of the items with a – beside them and see how much those items add up to.

That’s the amount of money you spent on things that are truly forgettable, that weren’t necessary and didn’t have any sort of positive impact on your life.

That money could have been used to pay down debts. It could have been used to save up for a down payment on a home or on a car. It could have been used to save for retirement through a Roth IRA contribution. Those things quickly turn a – into a +.

Even if you didn’t want to necessarily spend that money on those things, it could have at least been used on things that were really fulfilling when you look back on them, like a meaningful day at the zoo with your family or gas for a day trip to see your grandmother. Those things move, at the very least, into the neutral column.

This exercise isn’t meant for you to beat up on yourself. The truth is that everyone makes spending mistakes. If I go through my own credit card statements, you better believe that I’m going to mark some things down with a -.

The real purpose of this exercise is twofold.

First, it helps you to recognize how much of your spending goes toward things that are completely forgettable and have minimal life impact. People often wonder at the end of the month where all of their money has gone, and the truth is that a lot of it goes toward completely forgettable things with little impact. While it’s easy to acknowledge that truth in a general sense, this exercise makes it very specific and personal. It shows you how much of your spending is forgettable and low-impact. It even shows you exactly what those expenses are.

Second, it gives you a great deal of insight when it comes to your future spending. To me, this is the real value of this type of exercise. It shows you, front and center, how much money you’re spending ineffectively, plus it tells you exactly where you’re spending it. You can take that information and use it to improve your spending habits going forward.

How? Here’s how you can use that information to really reshape your spending.

First, look for patterns in the data. Where do you often spend money in a forgettable fashion? Is it at a bar? A gas station? A particular store? A website? Are there particular kinds of products that you often buy that you just forget about? Soda? Alcohol? Coffee? Entertainment? Look for things that show up again and again in your spending and see if you can make a short list of a few of those patterns.

Second, identify clear, specific life changes that will slash your spending in terms of the patterns you noticed. You have a few clear patterns that define your forgettable spending. What are you going to do about those things? For example, if you spend a lot of money on forgettable stuff online, consider deleting your credit card number from online stores that you frequently use, especially the ones where you buy forgettable things. If you often buy sodas or alcohol or other consumables that you simply forget about, make it your goal to cut those habits (it’s probably better for your health, too). If you find that there’s a ton of expense associated with a particular friend or social group, dial down your time with those folks and build up time with friends that don’t require spending.

Third, implement those changes. Ideally, you now have one or two real tangible changes that you can implement… so implement them. This can be a hard thing to do, so here are a few suggestions on making them click.

First, remind yourself of these initiatives every morning, early in the morning. Put aside a few minutes to specifically think about these goals. Put them on a big note on your bathroom mirror so you can think about them when you’re brushing your teeth, or put them as the lock screen on your smartphone by making an image with those ideas. I find that looking at these focus points right before or right after meditation or prayer (something I do every morning) is very helpful in terms of locking those ideas into my skull.

Second, focus just on today. Don’t worry about the failures of the past or the path ahead of you. Just worry about making sure you take care of those things today. If one of your initiatives is to cut online spending, just choose not to spend any money online today for anything. If one of your initiatives is to stop drinking alcohol, focus on not drinking today and use other outlets for your emotions. If you have an initiative that involves making social changes, make an active choice to spend some time cultivating a new friend or two today. Today is what matters.

Third, evaluate today before you go to bed. Much as you did in the morning, spend a moment or two reflecting on your initiative for the day at the end of the day. Did you manage to avoid drinking? Hooray! Success! If you didn’t, why did that happen? It’s not life-ending to have made a mistake, but it should be seen as an opportunity to figure out why you made a misstep and focus on making sure that you take care of the reason behind the curtain. I find that repetitive failures means that I need to be working on something else in my life as a daily goal because there’s some other challenge in some other part of my life that’s not working out right, so fixing that other challenge needs to come first.

Fourth, make (and continue) success chains. When I’m working on establishing a new “normal” in my life, it usually comes from consciously repeating a daily habit until it’s so normal that I don’t have to think about it any more. I find that it starts to happen around the 30 day mark but doesn’t really “lock in” permanently for at least 90 days of steady repetition. To keep myself motivated, I use the “success chain” system. I have a white board in my office where I have my top two or three daily goals listed. Next to each goal is a line of Xs. Each day, when I’ve successfully done that thing, I add an X to that line. If I haven’t successfully done that thing, I erase the whole line. I often look at this board during my morning evaluation of my daily goals, because maintaining that chain of Xs has a great deal of psychological power.

Use these strategies together to implement the changes you identified and actually cut that needless spending from your life.

Finally, see how those changes affect your spending in the next billing cycle. Skip a month, then take a close look at the first full billing cycle after you started implementing these changes. Go through it and do the same “+,” ” ,” and “-” exercise described above. Ideally, you’re going to notice a lot of positive change, probably enough that you immediately notice it in your lower-than-usual credit card balance or your higher-than-usual bank balance.

It feels good. Real good. The best part? Since it’s spending that really doesn’t matter to you, it’s easy to keep it going. You can do this.

It’s this type of cyclic pattern – looking for mistakes you’re making, looking for actionable steps to improve them, implementing those steps, and then checking the results – that is behind almost every kind of positive change people implement in their lives. Personal finance change is no different.

Weeding out forgettable spending is a particularly powerful type of change because you’re letting go of stuff that really isn’t very meaningful for you and replacing it with much more meaningful uses of your money, plus you can clearly see the impact month over month on your bank statements and credit card bills.

Give this little technique a shot. You’ll be pretty happy with the changes it brings.

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