Can't figure out where all your money is going or why you can't seem to save? Consistently keeping a spending journal and spending log will tell you exactly what's happening with your money. By recording your spending habits and transactions consistently, you can learn what you're spending your money on and why.
What is a spending journal, aka a spending diary?
A spending diary is a documentation of every single expenditure you make on a daily basis over a period of time. For instance, over a 30 day period.
The goal of having a spending diary is to keep you more aware of how you are spending your money, help you identify your spending habits, and also to help you identify what areas of improvement exist for you to do better. Keeping a spending diary is an incredible eye-opening exercise if you follow through. Think of it as a form of financial record keeping.
I highly recommend a pen and notebook that you carry around with you as opposed to keeping your journal in an app or other electronic forms. Why? There's just something about putting pen to paper when you first start this exercise as well as seeing things laid out in your own handwriting that helps with perspective. Psychology...magic...call it what you will, but it works!
Difference between a spending journal and a spending log
A spending journal is where you will write down how you feel when you purchase a certain item. A spending log will be the descriptive documentation of the purchase. For example, in your journal you could write, "I was feeling upset today, so I treated myself to a new pair of shoes." And then as a spending log, you could write the transaction of where you bought the shoes and how much they cost.
A spending journal is a type of effective journaling. It can help you make the connection between your thoughts, feelings, and habits. It also makes you accountable for your spending habits and gives you a visual of how you feel when you spend money. A spending log will record every single dollar you spend throughout the month. This will show you in black and white down to every dollar exactly what you are spending your money on.
How to build your spending log into your spending journal
In your spending journal, you can also create a section for your spending log. You can do this by dedicating a section in your spending log to keep all of your transactions in one place. Alternatively, you can add a journal section at the end of each spending log so you can track the emotional aspect of your spending. This essentially is the whole point of keeping a spending journal.
Remember, the spending log is where you record all of your transactions, similar to balancing a checkbook. There should be a section to write the date, descriptions of the transactions, and the amount of the transaction.
Another option when you build your spending log is to make a spending journal binder. You could put your notebook into the binder then use printable spreadsheets to use for your spending log. You can create spreadsheets with Excel or Google Sheets and print them out to put them in your binder. Remember writing in your spending journal, and spending log will help keep you accountable for your spending habits.
Setting up your spending journal
To successfully track your spending, you need to commit to writing something down every time you make a transaction over a specific period of time. This will help you identify your feelings and help you understand why you are spending money on various items.
From a pack of gum to coffee to lunch, every single transaction should go into your spending journal. You can either write down your thoughts and transactions as they happen or you can document things at the end of each day. Keeping your receipts handy will ensure that you don't forget any transactions. You'd be surprised at how much those little purchases add up to every month.
For example, if you bought a new handbag but didn't actually need it, you would record how you were feeling and what led to the purchase. Were you upset about something and buying the new handbag made you "feel better"? This is a crucial part of a spending journal because it can help you figure out your money habits based on your behavior.
How do you record your transactions?
If you choose to have a combined spending journal and spending log, you want to make sure you are recording your transactions properly. A great way to do it is to add enough detail so when you come back at the end of the day or at the end of the week to review your spending; you remember what it was that you spent money on. In your journal, consider including the following:
- The date
- The item description
- How much you spent
- What it was for and how you feel about the expenditure
For instance, if you purchased a coffee from Starbucks, then you would enter the date followed by the description of where and what you purchased, then the amount. Tracking your transactions helps you to see where your money is going.
Reviewing your spending journal
As you progress with documenting your spending, plan to review your journal at least once a week to see how you are doing. Remember, the goal is to help you gain clarity around your spending habits. So don't judge yourself and so don't edit your entries!
Instead, as you review your journal, come up with a plan or steps to adjust the spending patterns or habits that you are beginning to identify that you don't like and then build the changes into your budget as well.
As you track your spending in your journal, you'll start to find that you are more aware of your spending habits. You will even start to make better decisions around your money because you are now actively thinking things through instead of spending money without giving it much thought.
You may also find that you are spending less, which is the perfect opportunity to use those freed up funds towards your debt repayment or savings.
Track your way to financial success
There's no doubt that a spending journal will improve your finances. By tracking your habits and transactions you can learn how to budget your money better. This will help you work towards saving more money and help prevent money mishaps. To help reduce your spending even further check out these frugal living tips to save a ton of money! After all is said and done, it's definitely a worthwhile exercise to do!