Tracking spending, how to find the leaks in thirty days

What you'll have at the end

A real figure for your monthly spending, a list of the three biggest holes in your budget, and one decision about the first of them.

Step one: decide where you'll log, tonight

Pen and paper works. A note on the phone works. An app works. What doesn't work is "I'll start on the first of the month". Start with tomorrow morning's first expense, whatever today's date is. Pick one tool and keep it for thirty days; people who switch tools in week two lose a week of data and their momentum with it.

A budget is a scale with two pans, what comes in and what goes out. The income pan you know from lesson one. This whole month is for the other pan.

Step two: log at the moment it happens

The one rule with no exceptions: the expense is logged before you walk away from where you paid. Out of the supermarket, log. Out of the car at the petrol station, log. The evening doesn't work, because memory keeps the big purchases and drops the small ones, and the small ones are the whole problem. People who log in the evening lose about a third of their spending without noticing.

Voice is faster than typing: "forty-five groceries" as you walk, done. If you're on paper, write the amount and the first word that comes to mind, and don't think about categories yet.

Step three: pay cash for at least one week

Try this in week two: withdraw the week's spending money and pay for everything from it. Counting notes out and handing them over hurts a little, and that sting is exactly what a card removes; tapping it on a terminal doesn't even give you a pinprick, so you buy without knowing what's left. You don't have to live on cash. One week is enough to show you how much the card was buying on your behalf.

Step four: read the month the right way

On day thirty-one open what you logged and do only three things:

1. Add it all up and compare it with the figure you guessed in lesson one. The gap is usually 15 to 30 percent, and that's the first leak.
2. Sort the purchases from largest to smallest and look at the top ten. There'll be something in there you don't remember buying.
3. Add up everything under 50 AED on its own. That number is the surprise: for most people it's about the size of the rent.

Don't categorise yet. Categories come in month two, and people who start with them in month one get busy with the boxes instead of the numbers.

Step five: close one leak

You'll find plenty of leaks and the temptation is to plug them all in a month. Don't. Pick the largest, usually food delivery, top-ups or subscriptions you'd forgotten, and give it one specific decision with a deadline: "delivery twice a week instead of five, until the end of next month." One leak closed saves more than ten leaks trimmed.

Where most people trip

Around day eight. You miss one expense, then two, and decide the month is "ruined" and stop. It isn't ruined. Log what you remember from yesterday roughly and carry on; a month with a two-day gap is a thousand times more useful than a month that never finished.

Tonight's exercise

Pick the tool. Write down the first expense you'll log tomorrow before it happens: "morning coffee". Then set a reminder for day thirty-one titled "read the month".