Why and How to use a Spending Journal to Improve Your Finances

Have you ever felt like money just flies out of your account each month?

No, seriously. Like where did my paycheck go?

I’m usually pretty in tune with my money. I wouldn’t classify myself as an over spender or impulse shopper. Yet somehow magically I had money in my account a week ago when I got paid and now there is hardly anything left, with almost no memory of where it went. Amazon packages are arriving at the house addressed to me and I have to pause to remember what is inside.

Please tell me I’m not alone.

What is a spending journal?

I have found a useful way to help not only in my budgeting but to simply understand where the heck all my hard-earned money goes each month: a spending journal.

A spending journal is a dedicated place where you will write down every time you spend money over time. This can be temporary, to be used as a basis for starting or tweaking a budget. Or can be used regularly as a way for you to keep yourself in check with your spending and improve your finances.

If a journal isn’t your thing, think of it as a spending log, a budget journal, or even a “vacation money tracker” if that helps you to get started.

One of the biggest ways you can help yourself save is by knowing where your money goes!

Why spending journals help you save

If you’re a credit card user, you can see every charge on your card each month by logging into your account. And if that works for you awesome, use your monthly statement.

But if you don’t use credit cards or are looking for a more visual way to see where and how you spend your money laid out on a piece of paper, try the journal method.

It helps to see what you’re spending, where, and the frequency of your expenses. You may not even realize how often you truly do order things on Amazon that aren’t needed. Or that you continue to buy your child clothes they don’t wear. Or that you do in fact get dinner to go more nights per week than you thought.

Using a journal, notebook, or an excel template you print and filling each month is an easy way to keep yourself accountable for exactly where your money is going each month. It’s also a tool that can teach you to be more intentional about spending or saving your money for things that matter to you.

Money is so personal! And you may not even realize that you’re spending and it’s not bringing you happiness. Because it’s likely what matters to you is not the physical stuff you are buying. A journal can help you see that.

Benefits of a spending journal

You will SEE where your money went last month, not just think you know where it went
You can be creating or tweaking your monthly budget based on known numbers, not estimates. If you don’t have a budget, this is a great first start. Simply understanding how you spend.
The action of writing down what you spent and where will make you start to think more about the importance of these purchases relative to what’s important to you.
You will likely start changing your habits and think twice before spending. Maybe not on everything but over time you will probably start to develop new spending (or saving) habits.

How to start a spending journal

1. Decide where you are going to log your expenses.

You could start by taking just a simple piece of paper or notebook at home and creating a few columns with simple headers like date, what you purchased, what category that purchase would fall under in your budget, the amount, and if it was a need or a want.

Example of how the header of your paper could look:

Date | Purchase | Category | Total Spent | Need/Want

You don’t have to start on the first of the month, start today! The sooner you start tracking where your money is going, the faster you can start making changes to your budget to affect your finances positively!

2. Create the categories you plan to track.

You don’t HAVE to do this, but if you don’t you may forget which ones you’re using, or create a new one for just one expense. It’s helpful if you can decide upfront how you plan to categorize each expense. Start by simply thinking about where and how yo spend your money each month.

You can be as specific as you want for the categories. It may be helpful to choose just a few to start. I use only categories that I know I can control and that varies each month.

So, things like payment for where you live, or a car payment, or other loan payment, I keep off my tracker. Those things I already know what I owe each month.

Its things like groceries, gas, clothing, kids’ stuff (there always seems to be some reason to spend on them), eating out, etc. You can start with as many categories as you want because, at the end of the month (or whatever period you choose), you’ll add the categories up.

Pro tip: Create a category you know is a weak spot for you. If you are addicted to Amazon like I am, maybe create a category just for Amazon. Then you’ll know: Wow. I knew I spent a lot at Amazon, but I didn’t realize it was that much!

It will make you start to think: what else could I be doing with that money instead of spending mindlessly on things that are not truly needed?

3. Each time you spend money, jot it down in the tracker.

It truly is that simple. But you need to remember to do it! As soon as you make a purchase, grab that piece of paper, and get writing.

4. At the end of the month, tally up the total.

You’ll want to track not only the entire month of spending but also, calculate the subtotals of each of the categories you created.

In a digital world, this will seem crazy that you’re using a calculator and punching in a ton of numbers. But you’ll find it helps you stay accountable!

Keep track of each month as you complete them and notice any change in the total amounts or category amounts.

Are some months higher or lower in some categories than others?

Why is that?

Is there an average amount for each category you can try and not go over?

For example, if the last 3 months you spent $100, $150, and $200 on clothing for a total of $450 (an average of $150/month) can you try to spend less than $150 next month? Better yet, try to spend half that or nothing at all!

What to do next after you start your spending journal

Once you have a few months of completed spending journal entries under your belt, you can begin setting goals for yourself to achieve each month that challenge you to spend less money.

For those categories that are flexible, for example, gas, clothing, and food can you challenge yourself to spend 10%, 15%, or even 20% less in each of those categories next month?

What would it take to get there?

Some self-control.

Some more planning.

Do you need you to find a side hustle or ways to make more money?

Maybe looking at yourself in the mirror and realizing that your money doesn’t define you and spending more doesn’t make you any happier.

Conclusion

Money doesn’t have to rule your life. Take control of it by starting a bullet journal and monitoring where your money is going each month. After that, tweak your current budget, or start one of your own! I use a zero-based budget and find it works the best for me.

Did you start a spending journal?

What were you surprised to see you overspend on?

Steph