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- How To Analyze Your Spending Habits</p>
<p>Karen DoyleJuly 6, 2025 at 3:03 AM</p>
<p>Some people seem to have it all figured out when it comes to money, while others may be living paycheck to paycheck. But many people reach a point in their lives when they realize it's time to take control of their spending.</p>
<p>Maybe they want to get married, pay off their debt or save for a big purchase, like a home. Perhaps they just got a raise or a new job and want to have more control over their spending so they can put the extra money to work. Sound familiar? Regardless of the reason, the best time to get a handle on your spending is right now. So let's get started.</p>
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<p>Here's what you about how to analyze your spending habits.</p>
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<p>Gather Your Numbers</p>
<p>The first step in analyzing your spending habits is to understand how much you're spending, and on what. To do that, you need to look at what you've spent over the last three months — or, even better, the last six months. This will give you a good idea of where your money is going.</p>
<p>You'll need your bank statements and statements from any credit cards you regularly use. You may be able to get your transactions online and just export them into a spreadsheet, which makes this much easier.</p>
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<p>Categorize Your Payments and Purchases</p>
<p>Now that you have a list of all of the payments and purchases you've made over the past three to six months, it's time to see what you spent that money on. You can slice and dice these transactions in a thousand different ways, but that's time-consuming, and, honestly, this is where a lot of people get frustrated.</p>
<p>In order to analyze where your money is going, you only need to be concerned with three categories: needs, wants and savings. Your needs are things that you must have — and therefore must pay for — like your rent or mortgage, utilities, clothing, food, a car, etc.</p>
<p>The things you want to buy but can live without go into the "wants" category. This can include things like vacations, dining out, entertainment, gifts, etc. Don't worry — you don't have to cut all of these things out, but you need to account for them.</p>
<p>The third category is savings and debt repayment. It may seem strange to lump these two things together. After all, isn't your credit card bill a "need"? It's true that you have to pay your credit card bill, but what you want to categorize is not the bill itself but what you charged. So if you pay for your groceries with a credit card, the cost of the groceries goes in the "need" category. But if you carry a balance on your credit card, that goes in the debt repayment category.</p>
<p>The reason you could choose to lump savings and debt repayment together is paying off your debt is saving you money over the long term. If you pay off a credit card that's charging you 25% interest, that's a 25% return on your money. That's a better return than you'll get anywhere else, so that's the first order of business. Once you've paid off your debt, that money can go into your savings account.</p>
<p>Use the 50/30/20 Rule</p>
<p>Now that you've categorized all your spending into these three "buckets," you'll need to look at whether you're spending on the right things. Using your monthly take-home pay, determine what percentage of your pay is going to wants, needs and savings. You could use the 50/30/20 rule and aim for a target of spending 50% on needs, 30% on wants and 20% on savings.</p>
<p>Look at ways you can adjust your spending to meet these targets. If you're spending 40% on wants, look at what you can cut out. If your needs are responsible for over 50% of your spending, look at things like lowering your utility bills or driving a less expensive car.</p>
<p>Stay on Track With a Budgeting App</p>
<p>Once you've done your analysis and you've determined what you need to do to reach your 50/30/20 target, you'll want to make sure your spending stays in line. A budgeting app can help. You Need a Budget (YNAB) is a highly rated app that's easy to use. Rocket Money and Monarch are also popular choices, with Monarch providing some higher-level features like financial planning.</p>
<p>But the best budgeting app for you is the one you'll use, so try them out to see which one you think you can live with over the long term.</p>
<p>Analyzing your spending is a great first step toward getting your financial life on track. Using the 50/30/20 method is a relatively painless way to see where your money is going and what changes you need to make. And a budgeting app will keep you on track.</p>
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<p>This article originally appeared on GOBankingRates.com: How To Analyze Your Spending Habits</p>
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