The piece below is from the Wealth Builders Club’s “Debt and Credit Solutions” series. In it, Managing Editor Linsdey Hough shares the foundations of the “spending pyramid.” Use this simple tool to get an immediate handle on out-of-control spending habits…

 

Let’s move in close and get a good look at your individual purchases. How much, exactly, are you spending on dining out each month? How about entertainment?

The most important question is: How much money are you wasting? And where is it all going?

Well… you probably have no idea. To help figure it out—and put emotions aside—try using a grading system. Next to each item you spend money on, give that item one of three labels: Need to Have (N), Want to Have (W), or Luxury Items (L).

How do you differentiate between the grades? Try using this rubric:

The shape of your three-layered spending patterns should resemble a conventional pyramid. If your “pyramid” is fat in the middle—or worse, top heavy—you need to get your spending habits under control… as soon as possible.