I am always looking for different techniques to improve my finances and to get a better handle on my spending. I’ve used a variety of apps and budgeting software, but last month I decided that it was time to put pen to paper. Thus, the Spending Journal was born. And let me tell you: it was a PAIN. There was absolutely nothing simple about it. In the age of an app for everything, it was wildly inconvenient. However- it was probably the most helpful thing I have done so far when it comes to awareness of spending.
How it works:
At the beginning of the month, I wrote down all of my projected expenses. There are some things that are constant like our mortgage, cell phone, and internet bills. On the other hand, some things even like our water bill and electric bill vary every month. So I averaged out the last six months of water, electric, and gas and put that number down. Once I added all the expenses in that category together, I wrote down the word “Expectation,” with the number beside it. Then I wrote down the word, “Reality” and left a blank space for me to fill in at the end of the month.
I then started to move on to trickier categories like “Food” and “Family entertainment” and “Date night.” I wrote down what I projected for each one. I wrote down any potential expense I could think of, and then at the end made a “Miscellaneous” category for things I had forgotten. I put $100 in it to see how it would all pan out. Now it was time to begin journaling.
The premise of the spending journal is that you write down every single dollar that leaves your account. It must have a category. I even wrote down that I spent $0.52 for a Chocolate Truffle that I bought Nyra in line at Michael’s. I separated that amount from the $2.97 that I also spent at Michael’s on a wooden frame for her to decorate. That one went under “Gifts.” You see how tedious this could be?
Any dollar that left our bank account needed four things: A date, an amount, a category, and a name. The name portion is vital- because it’s easy to just write down “$7.89” under the “Eating Out” category, but that won’t help you at the end of the month. Our memories are notoriously faulty. For it to help you, it needs to say, “7/3/2017: $7.89 – Jimmy John’s (lunch).” When the end of the month comes around, you can see exactly how many times you called the delivery guy instead of packing a lunch. You want to track spending, yes, but what you really want is to track behavior.
What it does:
It forces you to be as aware of your spending as humanly possible. It also reinforces accountability, especially if you’re married. You’re no longer asking the question, “Where did all of my money go?” It’s right there in front of you!
It also gives you a starting point for your budget, and beyond that, something to work toward. When I first started budgeting, looking at something like the “Food” category was overwhelming. How much do normal people spend on food? What should people spend? The Spending Journal showed me that $100 for the month was too low, but that $600 was too high. That gave me a starting point.
You can’t budget the money you have coming in if you have no idea what’s going out. Most of us think we’re doing okay when it comes to our spending. Maybe you think you spend $100/month eating out when it’s really closer to $300. Why can’t you save any money? You’re eating it.
Writing down every dollar for a month straight is terribly boring and irksome. I wouldn’t recommend it as a constant practice. But it is truly an invaluable learning opportunity where you can start telling your money where to go, instead of wondering where it went.