why should you keep a spending diary?

I recommend keeping a spending diary as it really does give you the full picture of where all your money is really going – it shows you how much you actually spend rather than how much you think you spend. Which believe me, the two can be very different! It is so easy to forget those small purchases that really do add up.  Have you ever got to the end of the month and wondered, “How did I spend all that?” Well, a spending diary keeps a track of all those little purchases. Once you have got the diary filled in for a month it is incredibly valuable at helping you to see where your money is going and so helps you to take action to reduce or even eliminate. I also found that keeping a track of my spending in a diary meant that I was more consciously spending rather than unconsciously spending which in turn means we think more carefully about our spends.

how should you keep a spending diary?

Initially I recommend writing it all down with pen and paper. After time I was able to move on to an electronic version of a spending tracker. The reason I say this is because, personally, it is all too easy to spend electronically and so to just have a flick of the fingers into an electronic diary doesn’t have the same impact. HOWEVER, we are all different, and you may prefer an electronic version and so I recommend an app called Spending Tracker that is free and I use it on my Android phone. (I don’t get anything for this recommendation, I just like it!) Make it easy for yourself. The harder it is, the less likely you will do it.

Now, what to do and how to do it. You need to keep the diary long enough to get an idea of your spending patterns. I personally prefer a minimum of a month as it gives greater detail to analyse later on but three months is better. I include everything that is not a regular bill like rent, mortgage, council tax etc. I include cinema tickets, pub visits, meals out, takeaways, books, magazines, etc etc. Basically everything that is not a bill! I personally don’t include grocery shopping in this as I choose to do this separately, but include it if you want to know how much you are spending there too. I will be posting on the topic of food shopping very soon.

Write down the date you spent it, what it was you spent the money on, how much you spent. Initially you may want to keep it simple until you get into the habit of using a spending diary then for greater analysis later on you could also include extra details such as mood, why you spent it, who you were with when you spent it.

how to evaluate and review your spending diary

Then finally, the fun bit! (I call it fun as I like to analyse and look at data!) I found it fascinating those first few months to analyse my spending and we really do spend more than we think. This final piece of the puzzle is just as important as the tracking of it all as it really enables us to see where we are spending our hard-earned pennies and where we can cut down.

Add it all up at the end and get your total. Then break this total down into categories and work out those totals. Don’t panic if it feels like a bit of a shock. From here you can work out what you can cut out/reduce. To keep you going, think about what you could do with the money you save, start a savings pot, pay off debts, go on holiday.  Look here at one of my other posts on how much your daily coffee habit could save you! And just saving £50 a month would lead to a savings pot of £600 in 12 months.

Let me know how you get on or have any questions.