Ask anyone who is in debt why they are in over their heads, and more likely than not, you’ll hear thing like, “There’s just not enough money!” Yep, I’ve given that answer too, and even said it to myself more times than I care to remember.

While more money always helps (who wouldn’t like to have more money to work with each month?), there’s another, more fundamental factor. It probably played a major role in getting you into debt, and used correctly, it can help you get out.

Knowing Where Your Money Goes

The overarching problem isn’t just not having enough money… it’s not knowing where the hell your money goes!

Now, I like budgeting about as much as I like a good aneurysm, but it wasn’t until I sat down and faced the numbers that the light bulb came on in my head. Keeping track of your income and expenditures is like exercise or eating fiber – it’s rarely pleasant, but it’s necessary if you want results.

Why is keeping track of your money so hard?

50-odd years ago, we were a mostly cash-based society. When payday rolled around, you had a wad of cash in your wallet (or money clip, if you were a fancy-pants). When the money was done, so were you… at least until the next payday rolled around. It was pretty simple to think about what you were spending money on when it was tangible – you could hold it, count it, and admire the thickness of your stack of bills (or lament the thinness thereof).

Today, well, that’s a different story.

I rarely have more than pocket change on me when I go to the store, or gas station, or wherever. In fact, I just checked my pockets, and I have exactly $1.72 in change on me right now. No paper bills.

Instead, I have a debit card, which I use for virtually everything. Gas. Groceries. Taking my kid to McDonalds. And I’m not alone in this. Go to your local fast food restaurant and take note of how many people pay for a $5 meal with a debit card.

Now, I’m not saying all of this is bad. I appreciate the convenience of not having to carry around cash, or worrying about losing it. And I can’t think of more than a half-dozen times in the last 6 months when I’ve absolutely needed cash. My kid’s school even lets me fund her lunch account with my debit card (so, unlike with my generation, she doesn’t have anybody beating her up and taking her lunch money).

It does, however, require a more watchful eye. A $4 coffee purchase doesn’t seem like much, but add up all of the small debit card purchases over the course of a month, and you’ve got a sizable chunk of money you didn’t even realize was gone.

So how do I sort all of this out?

Figuring out your income is pretty easy, unless you’re a freelancer like me. When you get your pay stub, you know how much you have to work with. (If you are a freelancer, you absolutely need a spreadsheet showing who owes you money, home much they owe, and when they pay.)

As for expenses… well, it’s time to drag out those bank statements. Then pull up another spreadsheet. Sort all of your debits by:

• installment payments (mortgage, car loan);
• revolving debt (credit cards, store cards);
• utilities (electricity, phone, internet, water, trash)
• groceries
• discretionary expenses
• other (alimony, child support)

If you do carry cash, you’ll need to keep track of what you spend that on as well. Keep a pocket-sized notepad and pen to document expenditures, and transfer them to your spreadsheet at the end of the day. (I’m sure the new android phones/pocket computers/X-wing fighters have an app for that sort of thing, but I haven’t upgraded my silly pre-paid phone, so I can’t say for sure).

Do this for a month without fail. It may seem cumbersome to document every penny you spend, but it will give you a clear picture of where your money goes. You might even spot some areas where you can trim some fat, so you can chuck more money toward getting out of debt.