If you want to increase your success with budgeting and money management, start keeping a spending journal. Period.
Before starting our spending journals we could not get a solid handle on our budget. Discretionary spending is the silent killer looking to wreak havoc on your budget.
discretionary spending – (economics) The amount or portion of a person’s or group’s expenditures which is used for non-essential or voluntary disbursements; the amount or portion of one’s expenditures which one may make as one sees fit. – wikitionary
I sense a high degree of passion for debt freedom in most of you, but know the pitfalls we all face while trying to get there and have found our spending journals to be a cornerstone of financial success.
What is a spending journal?
A spending journal is a small notebook for recording your daily discretionary spending.
“A small leak can sink a great ship” – Benjamin Franklin
You do not have to record every penny! What? That’s right… despite what you may have heard, you do not need to record every penny that flows through your budget in your spending journal – you only need record expenditures that are not part of your regular monthly payments.
For example: You do not need to record your car payment, phone bill, rent/mortgage payment, insurance payments, etc. Instead you want to focus on the little “nickel and dime” purchases you make throughout each and every day. You know… the ones that drain your checking account each month and leave you asking, “where did that extra $400 go?”
Note: You do need to keep track of all your money, but your spending journal is only for keeping track of discretionary spending.
Why keep a spending journal?
It will help you control your money rather than you being controlled by your lack of money.
- To track the small, everyday expenditures that are causing the small leak in your great ship!
- To help you curb spending.
- To help you prioritize your spending.
- To make budgeting much, much, much easier.
Note: Budgets fail because people have a hard time controlling and tracking discretionary spending. That trouble ends with the proper implementation of the spending journal!
How to keep a spending journal
Keeping one is easy – don’t let anyone tell you otherwise.
You spend a dollar, you write it down. You spend $100, you write it down. Can’t write it down right this second? No worries – keep your receipt and write it down later – just make sure you write it down!
- Keep it simple. You do not need to be über math geek. Simply record the date, the amount, the item, and the budget category. For example, if I purchased a coffee for $1.25 on the 2nd day of the month my entry would look like this: 2nd – $1.25 on coffee = dining & entertainment.
- Keep it on your person. Ladies: carry it in your purse. Fellas: I carry a man bag (I swear I’ll write more about it someday) and keep my pocket-sized spending journal and pocketbook inside. I keep the bag with me most all the time. If you’re too manly to carry a bag then keep your spending journal somewhere you frequent daily like your kitchen counter, your vehicle, or at work.
- Save receipts. If you cannot record the purchase right away, keep the receipt and record it when you get back to your journal.
- Write down every discretionary penny spent. Not every penny that comes through your checkbook, just the random purchases not already accounted for in your budget.
- Total it up each months end. You may hear others advising to total it up every day… don’t bother, that is too complicated. All you need to do is add up the overall total along with the total of each budget category.
- Add the totals to your budget. Now that you have successfully tracked and categorized your discretionary spending, go add the numbers to your budget being careful to fill the proper amounts in for each category.
- Adjust your budget accordingly. This is the really cool part. Adjust the amounts for next months projected budget based on the numbers you spent the previous month. Continue to do this each month, deriving averages in your monthly discretionary spending and always looking to “trim some fat” whenever possible.
Some say to do this for a month or two… I say do it for the rest of your life. Trust me, it’s easy and it makes all other financial planning/budgeting much easier and less overwhelming.
Note: I’m not talking about using Quicken, or Mint.com… I’m talking about good old fashioned pencil and paper record keeping kept on your person.
Try this for one month. I’ll bet it makes an enormous difference in your financial life – even if you thought you already had it in order!
What say you? Are you in?
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DFA is passionately dedicated to helping people break the bondage of debt and work toward financial freedom using biblical principles.