Where do you sit on the spend vs save spectrum?

Before you consider applying for a new credit card, it’s a great idea to do a budget stocktake. This way, you’ve got a good understanding of how much you spend versus how much you earn each month. Spoiler alert: if your monthly spending is too high, then you could be more likely to fall into credit card debt.

Here are some simple ways that you could monitor your money coming in and going out to identify where you sit on the spend-save spectrum.

Start a daily diary

Have you ever written down (or recorded on your phone) exactly what you spend each day? You may be surprised at just how often you hand over cash or swipe your card for daily essentials and other stuff. It all adds up, often faster than you think.

To track your daily and weekly spend, pop a small notebook in your bag and carry it with you everywhere you go. Or, perhaps use your phone, computer or tablet if digital is your preferred modus operandi. Every time you buy something, record it. From the morning coffee to the bread-and-milk run to train tickets, it all goes into the notebook.

Persist with this for a month, adding up your totals at the end of each day and week. If you’ve got recurring magazine subscriptions, gym memberships or streaming services charged to your credit card, add these in too. After a month, you’ll have an idea of just how much you’re spending day to day.

Scrutinise your bank statements

As well as a daily diary, look at your bank statements. Whether online or paper-based, pore over at least your three most recent bank statements to identify trends in your spend. By looking at a longer period, you’re more likely to spot big-ticket, infrequent items like utility bills and medical expenses. Your bank statements will also reveal things like bank fees, charges and interest, which can get overlooked in a budget.

Remember to consider those yearly, quarterly or biannual expenses (for example, insurance or car rego), too. These might not show up if you’re only looking back over a few months.

On paper, you could consider using highlighters to track different spend categories. For example, yellow for the local supermarket, blue for subscriptions, green for fashion, and so on. This way, you start to get a sense of where your money’s going (which could help you identify areas where you could potentially save).

See where you sit on the spend-save spectrum

Once you’ve done a thorough analysis of your spending and saving, and you’ve worked out all of your expenses relative to your income (including whether you’ve got enough money each month to meet all of your financial commitments) then you should be in a better position to understand whether you’d be able to pay your credit card balance off in full each month to avoid paying interest (if that's your goal).^disclaimer It might also give you an idea of whether the credit limit you’re considering applying for is right for you.

If, following your homework, you feel that you’re sitting too far in the ‘spend’ zone or you’re keen to move further into the ‘save’ zone, then perhaps read our tips on how to split your spending into budget buckets  – which might give you some ideas on ways that may help you to cut down on unnecessary items.

The bottom line?

It’s a great idea to know where you stand on the spend-save spectrum before you apply for a credit card. Remember, if you start using a credit card and don’t pay it off in full each month, then you may pay compounding interest (and fees).^disclaimer